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. Last Updated: 07/27/2016

TRW Pitches $6Bln Spinoff To Dodge Northrop Merger

NEW YORK -- Aerospace and defense contractor TRW Inc. on Wednesday unveiled plans to spin off its massive auto parts business as part of a strategy to ward off a $6 billion hostile takeover offer from defense giant Northrop Grumman Corp.

The spinoff, which TRW hopes to complete in the next six to nine months, and likely sale of the company's Aeronautical Systems Group, now leaves shareholders of Cleveland-based TRW to choose between the Northrop offer and a TRW management plan to break up the company.

"We believe that the [auto parts] spinoff creates much greater shareholder value, and that's why we are heading down this course," TRW chairman and interim chief executive Officer Philip Odeen said in an interview.

"We have two pure-play companies [auto parts and defense], both of them with strong technologies with lead positions in their markets, and we believe each of them will be valued appropriately at the high end of the multiples for their peers," he said

Northrop had no immediate comment, but TRW later said it would hold a special shareholder's meeting, as required by Ohio law, on April 22 to vote on the offer. TRW rejected the bid for a second time earlier in the day.

Analysts said the Los Angeles-based company would likely come back with a higher offer. Its bid of $47 per share is well below TRW's current share price.

"What [Odeen is] doing with the split-up is letting the shareholders value them as opposed to some other company," said Andrew Casey, an analyst with Prudential Securities.

"I'm not sure what [Northrop is] going to do. But if they really want the business, I would assume that they would have to pay some sort of premium above $51 to $52 [per share]," he said.

TRW shares closed up 89 cents, or 1.77 percent, at $51.17, while Northrop climbed 43 cents to $109.90, both on the New York Stock Exchange.