Northrop Grumman to Buy Orbital ATK for $7.8 Billion

U.S. defense contractor Northrop Grumman has agreed to acquire aerospace and defense firm, Orbital ATK for about $7.8B in cash, plus the assumption of $1.4B in net debt.

Orbital, based in Dulles, Va., makes rocket motors that power missiles, and it designs and produces target launch vehicles that are used to test missile defense systems. The company also makes the interceptor boosters for the U.S. Ground-based Midcourse Defense (GMD) system, the country’s land-based Ballistic Missile Defense (BMD) system.

Northrop, known for its Global Hawk reconnaissance drones and B-1 stealth bombers, recently won a contract to build the next generation B-21 stealth bomber. It also supplies frames for Lockheed Martin F-35 fighter jet.

Orbital is a subcontractor for composite structures on the B-21, and the deal might spark concerns at the Pentagon because of vertical integration within that program.

Northrop — along with competitor Boeing — was recently chosen by the U.S. Air Force to continue work on designs for a new intercontinental ballistic missile (ICBM) system known as the Ground-Based Strategic Deterrent (GBSD) program. The program is to replace the aging Minuteman III ICBMscurrentlyused by USAF.

Earlier thismonth, aerospace supplier United Technologies Corp (UTC) agreed to buy avionics maker Rockwell Collins in $30 billion deal that would be the largest in the industry’s history.

Like the UTC-Rockwell Collins deal, Northrop’s acquisition of Orbital is a sign of further consolidation in the aerospace and defense sector — Orbital itself was created in 2015 when Orbital Sciences Corp. combined with Alliant Techsystems Inc.’s aerospace and defense groups.

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