Case | HBS Case Collection | March 2003 (Revised January 2008)

Northrop versus TRW

by Carliss Y. Baldwin and James Quinn

Abstract

TRW, a leading supplier of advanced technology products for the auto, defense, and aerospace markets, receives an unexpected stock-for-stock offer from defense company Northrop Grumman Corp. The $11.4 billion aggregate offer, which represents a 22% premium over the average trading price for the previous 12 months, comes just two days after TRW's CEO has, without notice, resigned. TRW's board is faced with a difficult decision on which they vote in a few days: Should they "just say no," rejecting the offer out of hand? Should they negotiate a friendly deal with Northrop? Or should they put TRW in so-called "Revlon mode" and auction the company to the highest bidder? This case, grounded in the specifics of Ohio's strict antitaker laws, explores defensive tactics, hostile tender offers, the duties of the board, and fixed-price exchange. It is for use in an advanced course on mergers and acquisitions.

Keywords: Mergers and Acquisitions; Decision Choices and Conditions; Governing and Advisory Boards; Laws and Statutes; Negotiation Tactics; Valuation; Aerospace Industry; Auto Industry; Ohio;

Citation:

Baldwin, Carliss Y., and James Quinn. "Northrop versus TRW." Harvard Business School Case 903-115, March 2003. (Revised January 2008.)