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Northrop to Buy Allegheny Unit

May 28, 1999| From Bloomberg News

Northrop Grumman Corp., the No. 5 U.S. defense contractor, agreed to buy Allegheny Teledyne Inc.'s Ryan Aeronautical unit for $140 million in cash to expand its unmanned air vehicle business.

Ryan Aeronautical designs and makes unmanned airborne vehicles and systems for the Defense Department and international military customers. In an earlier incarnation, when it was known as Ryan Aircraft more than 70 years ago, the company built the Spirit of St. Louis for Charles Lindbergh.

Today, the San Diego-based unit has about 300 employees. Last year it posted sales of about $100 million in its unmanned air vehicle business.

The purchase strengthens Los Angeles-based Northrop's surveillance business and positions it in an area that is expected to increase. Unmanned air vehicles, such as closely held General Atomics' Predator UAV, are being used in the war in Kosovo and have been used for reconnaissance and surveillance in Bosnia and Iraq.

"This is one of the real futures of reconnaissance," said Keith Patriquin, an analyst at Loomis Sayles & Co. "It's a future growth area of defense spending."

Ryan Aeronautical's Global Hawk unmanned aircraft, which will provide reconnaissance and surveillance, is an advanced flight demonstration program managed by the Air Force. The unmanned aircraft will stay at altitudes of about 65,000 feet for long periods of time, several thousand miles from its base, and send images and other data by satellite to ground stations.

Northrop expects the unit to move from San Diego to another facility within a year.

The acquisition is expected to be completed in the third quarter.

Pittsburgh-based Allegheny Teledyne had been looking to sell Ryan Aeronautical since January as part of its consolidation program after its formation from the merger of Allegheny Ludlum Corp. and L.A.-based conglomerate Teledyne Inc. in 1996.

In New York Stock Exchange trading, Northrop shares fell $2 to close at $68.38, and Allegheny shares fell 75 cents to close at $20.81 in a broad market sell-off.

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