Northrop Grumman Corp. has told TRW Inc. executives it is willing to raise its offer for the company to $58 a share, or about $7.2 billion, as three defense industry rivals proposed acquiring TRW's space and defense electronics business, sources familiar with the bidding process said Tuesday.
In its latest proposal, Northrop has apparently told TRW that the bid--$5 more than the previous proposal of $53 a share--merely represents a starting point for a friendly deal that could send the figure up slightly.
Northrop's new bid came as General Dynamics Corp., Raytheon Co. and the U.S. unit of Britain's BAE Systems submitted their own bids to acquire TRW's defense-related businesses, a move that was seen as putting pressure on Northrop to increase its offer.
Officials with the three companies, as well as Northrop, declined to comment, citing policy against making statements related to pending deals.
The companies signed confidentiality agreements with TRW prohibiting disclosure of any details.
While the three companies only want a piece of TRW, Northrop has been after the entire company, including TRW's debt-laden automotive parts business.
Northrop has said it would spin off the auto business and keep only the defense business if it is successful.
Northrop's latest offer comes on top of a sweetened bid that had raised the potential value of the deal to $6.7 billion from the initial $5.9 billion.
Analysts have been anticipating the revised bid in light of TRW's improved financial picture.
Since Northrop made the hostile bid in February, TRW has been able to shed its aeronautical systems business for $1.5 billion, bolstering its cash position, and has benefited from an uptick in defense spending. TRW sold the aircraft parts business to Goodrich Corp. last week at a price that was at the high end of analysts' expectations.
Still, the possibility of a bidding war drove down defense stocks. In New York Stock Exchange trading Tuesday, Northrop shares fell $4.35 to $124, while General Dynamics declined $4.88 to $103.13. Shares of Raytheon, which surprised analysts with its bid, fell $2.37 to $38.58 and TRW declined 60 cents to $55.85.
Although General Dynamics and BAE were known to be interested in TRW's defense business, Raytheon was not considered a potential bidder because of its weaker financial condition.