Bid for Northrop Grumman shipbuilding revealed

A company executive confirmed “To the best of our knowledge, we’re the only company that has made an offer on the entire enterprise,” said Ed Bartlett, president and CEO of Cleveland Ship LLC. Terms of the offer have not been disclosed, but Northrop’s shipbuilding division may be worth as much as $4.6 billion at an average industry multiple, according to Bloomberg News.

If successful, Cleveland Ship would acquire Northrop Grumman’s shipyards in Newport News, Pascagoula, Miss., and Avondale, La., as well as two subsidiaries, AMSEC LLC, based in Virginia Beach, and Continental Maritime, a San Diego ship repair facility.

The acquisition company would be known as Cleveland Shipbuilding Group Inc., and Northrop’s Newport News facility would become ‘CSG Newport News Shipbuilding’.

Cleveland Ship’s offer comes a little more than two months after Northrop Grumman announced in mid-July that it was closing the Avondale yard and exploring ‘strategic alternatives’ for its shipbuilding unit, including a possible sale or spin off to shareholders.

With nearly 20,000 employees in Newport News, the shipyard is Virginia’s biggest industrial employer. It’s the only facility in the nation that builds the Navy’s aircraft carriers and one of just two that builds submarines. Bartlett said a news conference is scheduled for later this week to present Cleveland Ship’s offer in more detail. “It’s a multi-billion-dollar offer that, as far as we know, is completely consistent with Northrop Grumman’s expectations,” he said.

Cleveland Ship plans to keep all of Northrop’s shipyards open and maintain current employment levels, said Ron Ault, president of the Metal Trades Department, AFL-CIO.

“It’s Ed’s business plan and his unusual vision that we find intriguing, particularly with the shipyard getting ready to close in Avondale, La.,” Ault said.

The financing for Cleveland Ship’s bid has been arranged and sources provided to Northrop Grumman, Bartlett said. The equity is all from the United States, with no foreign partners, he said. The Navy has said it would object to foreign ownership of key shipbuilding assets.

Bartlett said there are rumours of other firms interested in acquiring pieces of Northrop’s shipbuilding business, but that Cleveland Ship’s is the only one he knows that wants the whole operation.

The company was established to build, own and operate the Navy’s next class of fleet oilers and, while the firm does not own a shipyard, the executive team running the company brings decades of experience in finance and the maritime industry, Bartlett said.