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Naval Report Good Vibes Surround General Dynamics, NNS $2.6B Deal In a move that could possibly trigger the final slowdown in naval shipbuilding corporate asset consolidation, General Dynamics late last month made a $2.6 billion (a total which includes nearly $500 million of current debt takeover) bid to buy Newport News Shipbuilding. The move — while hardly a shock to defense insiders who have witnessed the proliferation of fewer, larger corporate entities serving the military markets — in essence provides the Pentagon a one- stop shop for the purchase of nuclear submarines and nuclear aircraft carriers. Just two years ago a similar attempt by General Dynamics was thwarted, large- ly because the bid in 1999 was hostile in nature and because of concerns regard- ing a monopoly of nuclear newbuilding capability. Less than 24 months later, however, the picture has changed rather drastically. First, and perhaps foremost, the demand for nuclear powered sub- marines is dwindling, and with only one customer to serve — the U.S. Navy — quite frankly there is not enough busi- ness to go around. "This deal is no loss for competition, because there is no competition (between the two ship- yards,)" said William Fricks, chairman and chief executive of Newport News. According to Nicholas D. Chabraja, William Fricks, NNS General Dynamics chairman and CEO, the two yards have not effectively com- peted against each other since 1991. For the past three years, in fact, the two have been cooperating in the joint building of the Virginia class submarines, a factor of familiarization that has helped to bring the newly proposed merger to fruition. "Our businesses are complementary, as opposed to competitive," said Chabraja. "These companies cry out to merge together. It's a natural phenomenon and a logical next step." Another positive sign for the deal: the current offer is actually welcomed by NNS. "This acquisition will provide Newport News shareholders an attrac- tive price, and our employees will bene- fit from being part of a larger, more diverse company," said Fricks. In addition, the Bush administration is widely regarded to be more favorable to such consolidations, much more so than former president Clinton. The deal would also not be setting precedent, General Dynamics' bid fol- lows Northrop Grumman Corp.'s $3.8 billion purchase last year of shipbuilder Litton Industries. Finally, the merger now has the support of U.S. Sen. John ABSolutely Committed to Customer Service m 1 • i- Js*1,- «HI »» mil L. ' ? m W 3 a Superior customer service starts with our experienced surveyors and engineers. The entire ABS worldwide team is committed to providing innovative solutions for designing and operating the latest generation of safe and environmentally sound offshore vessels. Recognized by industry as one of the leading international classification societies. ABS is committed to keeping your projects on-time, on-schedule and on-budget. Setting Standards of Excellence in Marine and Offshore Classification ABS www.eagle.org 24 Circle 268 on Reader Service Card . . www.maritimetoday.com Maritime Reporter & Engineering News
