U.S. Federal Trade Commission (FTC) officials in Washington approved the deal with the condition that the companies provide “solid fuel rocket motors on a nondiscriminatory basis to competitors for missile contracts,” so as to avoid reducing competition, resulting in less innovation and higher taxes, in the market for missile systems purchased by the U.S. government.
The FTC is also requiring firewalls between the newly formed Northrop Grumman Innovation Systems business, which includes the assets of short-range missile supplier Orbital ATK, and the rest of Northrop Grumman to prevent the transfer of proprietary information that it receives from competing missile prime contractors or suppliers.
The FTC further requires the U.S. Department of Defense (DoD) in Washington to appoint a compliance officer to oversee Northrop Grumman’s conduct pursuant to the settlement. The contingency follows an award last August by the U.S. Air Force to Northrop Grumman, one of four companies capable of supplying the U.S. government with missile systems, as well as Boeing for separate contracts to continue work on replacing the old Minuteman III with a new Ground-Based Strategic Deterrent (GBSD) and its nuclear cruise missiles.
The GBSD is the U.S. Air Force’s intended replacement for the Boeing LGM-30G Minuteman III intercontinental ballistic missile (ICBM) system, a land-based and silo-launched nuclear deterrent in use since 1958. Prime systems integrator and original equipment manufacturer (OEM) Boeing has produced, tested, and deployed every Minuteman ICBM for the U.S. Air Force – over 1,800 Minuteman-series missiles in total. Boeing also has provided more than 50 years of continuous enhancements to help ensure the safety, security, and effectiveness of the Minuteman system, extending its lifespan from the original expectation of 10 years to roughly six decades.
GBSD is expected to begin deployment in 2027 and remain in service through 2075. Officials anticipate the Minuteman III will remain in place and continue its role through, and potentially past, the year 2030.
Northrop Grumman manufactured solid rocket motor stages for Minuteman I, Minuteman II, Minuteman III, and Peacekeeper. Northrop Grumman was also responsible for refurbishment of all three Minuteman III solid-propellant stages as part of the Propulsion Replacement Program. Northrop Grumman is the Prime contractor for sustaining Minuteman III propulsion under the Propulsion Subsystem Support Contract and leads a team of original equipment manufacturers and is responsible for all solid propulsion, liquid propulsion, ordnance, flight controls, and batteries, officials say.“Together, through our leading technologies and innovation-focused culture, we look forward to developing enhanced mission capabilities and more competitive offerings in critical global security domains,” says Wes Bush, Northrop Grumman chairman and chief executive officer.
"The acquisition of Orbital ATK is an exciting strategic step as we continue to invest for profitable growth. Through our combination, customers will benefit from expanded capabilities, accelerated innovation, and greater competition in critical global security domains. Our complementary portfolios and technology-focused cultures will yield significant value creation through revenue synergies associated with new opportunities, cost savings, operational synergies, and enhanced growth,” Bush says.
The global aerospace and defense technology company formed with Northrop's 1994 purchase of Grumman. Along with its new division, the company’s three existing business sectors include Aerospace Systems, Mission Systems, and Technology Services.
"The unique alignment in culture and mission offered by this transaction will allow us to maintain strong operational performance on existing programs while we pursue new opportunities that require the enhanced technical and financial resources of a larger organization. Our employees will also benefit from greater development and career opportunities as members of a larger, more diverse aerospace and defense enterprise. We will remain focused on operational excellence and execution during and after the transition into Northrop Grumman," adds David Thompson, former president and chief executive officer of Orbital ATK.
Upon finalizing the sale, former Orbital ATK Chief Operating Officer Blake Larson was named corporate vice president and president of Northrop Grumman Innovation Systems, and will report to Kathy Warden, Northrop Grumman’s president and chief operating officer.
With unanimous approval of the acquisition by the boards of directors at the former companies, Northrop Grumman remains committed to maintaining a solid investment grade credit rating by using its strong cash flow to support the reduction of debt assumed with the acquisition. With debt financing in place, Northrop Grumman will continue to pay a competitive dividend and repurchase shares. The company expects sales for 2018 to reach $30 billion.