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TRW to Spin Off Auto-Parts Business

June 05, 2002|From Bloomberg News

CLEVELAND — TRW Inc., facing an $11.9-billion takeover bid from defense giant Northrop Grumman Corp., filed Tuesday to spin off its auto-parts unit.

TRW valued shares of the unit at $1.5 billion, according to a Securities and Exchange Commission filing. For each share of TRW owned, the firm's shareholders would get one share of the automotive business, which is the No. 2 maker of air bags and also produces seat belts and braking systems.

The spinoff comes as Northrop and other companies are holding talks with TRW about a friendly takeover. Los Angeles-based Northrop, the fourth-largest U.S. defense contractor, wants to buy TRW's defense unit to expand its military space operations. Northrop has said it would dispose of the auto business, which accounted for two-thirds of TRW's $16.4 billion in sales last year.

"If anything, it might expedite Northrop's plans," said Scott Keller, the head of, a New York-based firm that analyzes mergers.

TRW said in March that it planned to either sell or spin off the Livonia, Mich.-based auto-parts business to become a stand-alone defense contractor. Chief Executive Phil Odeen had said several "well-capitalized" companies, which he wouldn't name, were interested in buying the business.

Instead, TRW has opted to spin off the unit in what it hopes will be a tax-free deal for shareholders.

The filing didn't specify a date for the spinoff. TRW said the distribution could take place in six to nine months. Shares of the new company would trade on the New York Stock Exchange under a symbol that hasn't been picked. The auto unit is expected to have $2.8 billion in debt.

TRW Automotive also is selling an unspecified amount of convertible preferred stock to outside investors as part of the deal.

TRW is the No. 8 U.S. defense contractor and is a major subcontractor on the U.S. missile-defense program. Northrop is the maker of the Global Hawk aerial drone and is the largest military shipbuilder.

Shares of Cleveland-based TRW rose 5 cents to $54.48 on the NYSE in regular trading. The spinoff was filed after markets closed.

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