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TRW Board Urged to Open Books

Aerospace: Vote signals that shareholders are willing to consider the bid, analysts say, adding pressure for talks.


TRW Inc. shareholders urged company executives to share detailed financial records with Northrop Grumman Corp., in what some analysts called the first symbolic gesture that the shareholders were willing to consider Northrop's hostile bid.

The vote, which came during an annual meeting in TRW's hometown of Cleveland, could put added pressure on TRW directors to open up the books and begin talks with Northrop, analysts said. It marked the first time that shareholders were asked to vote on Northrop's offer to acquire the company for $6.7 billion.

Though the move did not represent an outright endorsement of the bid, it was one of several hurdles that Century City-based Northrop has to overcome in its bid for the defense and automotive parts company. A vote against the proposal could have hindered Northrop's ability to pursue TRW, one of the defense industry's last major concerns largely untouched by consolidation.

Northrop faces another major hurdle next week, when TRW shareholders hold a special meeting to consider proposals that would mitigate certain restrictions in Ohio law regarding hostile takeovers. One proposal would allow shareholders who acquired more than $250,000 of TRW stock after Northrop announced its bid to have a vote on the offer.

"It's one more step in what tends to be a long, drawn-out process," said Jon B. Kutler, president of Quarterdeck Investment Partners Inc., a Los Angeles-based defense industry investment bank.

Not surprisingly, TRW and Northrop claimed their first victory. TRW officials said shareholders rejected two other proposals submitted by Northrop, which they said demonstrated shareholders' confidence "not only in the TRW board but also in the strategic direction of our company."

As expected, TRW shareholders rebuffed a proposal to establish a panel of independent directors and an initiative that would have urged TRW directors to give shareholders the ability to decide for themselves whether to exchange their shares for Northrop's stock.

Northrop is offering to exchange each TRW share for $53 of Northrop shares. Northrop raised its offer of $47 after TRW directors rejected it as "grossly inadequate."

TRW directors said the revised offer was still "inadequate" and announced it was accelerating plans to break up the company, selling off its airplane parts business, using the proceeds to pay down debt and then spinning off its debt-laden automotive parts operation. TRW would then keep its military satellite and defense electronics business, a plan similar to what Northrop said it would undertake once it acquired the company.

"We saw it as a very strong endorsement of our strategic plan," TRW Chairman Philip Odeen said in an interview Wednesday.

He added that he didn't think the shareholders' vote urging management to share financial information would place any added pressure on the board to begin talks with Northrop.

"I don't see that at all," Odeen said. "We're already focused on opening the books, and we'll do the right thing as long as it is in the best interest of the shareholders."

For its part, Northrop said the shareholders were sending a "strong message" to TRW executives to give Northrop access to the financial records without undue restrictions.

Al Myers, Northrop's treasurer, said the company would be willing to pay a higher price if there was confidential information that enhances TRW's value. "Show us the hidden value," Myers said.

TRW shares eased 33 cents to $54.50 on the New York Stock Exchange.

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