Cleveland Ship LLC, a company formed to bid for a new class of U.S. Navy oilers, made a multibillion dollar bid for Northrop Grumman Corp.’s shipbuilding unit, the new company’s chief executive officer said today.
The Cleveland-based company didn’t specify the value of its Sept. 23 bid in an e-mailed statement dated yesterday.
“It’s a multibillion dollar bid,” CEO Edward Bartlett said in a telephone interview. The offer includes both debt and equity, Bartlett and his partner Renold Thompson said in the interview.
If Northrop accepts the offer and the transaction is completed, Cleveland Ship will create a publicly traded company called Cleveland Shipbuilding Group Inc., Bartlett said.
Northrop’s ship division may be worth as much as $4.6 billion in a sale at an average industry multiple, based on data compiled in July by Bloomberg. Los Angeles-based Northrop said in July that it would shut the shipyard and shift operations to Mississippi as a first step in selling or spinning off the unit.
Cleveland Ship said it expressed interest earlier this year in buying Northrop’s shipyard in Avondale, Louisiana. A Navy plan announced last month to accelerate production of double-hulled oilers may enable Northrop, the largest maker of Navy vessels, to keep the Louisiana shipyard open long enough to find a buyer.
Northrop doesn’t comment on “issues regarding mergers, acquisitions or divestitures,” Randy Belote, a spokesman, said by telephone.
$5 Billion Order
Navy contracts valued as much as $5 billion for two DDG-51 class destroyers and one LPD-17 class transport ship for Northrop’s Ingalls yard in Pascagoula, Mississippi, may be affected by how soon the shipbuilding unit is sold, Bartlett said. Once the Navy knows the future of the yards, it will be in a better position to assess the cost structure and award the contracts, he said.
Belote, speaking for Northrop, said the company is discussing contracts with the Navy and “wouldn’t want to play those negotiations in the media.”
Cleveland Ship’s proposal for a new fleet of double-hulled oilers to replace the Navy’s single-hulled ships may be worth $8 billion, Bartlett said in the statement. Bartlett is a retired U.S. Navy officer and former executive at DRS Power Systems, according to the Cleveland Ship website.
Cleveland Ship sees an opportunity for $10 billion to $12 billion in new business bookings at Avondale in the next decade or so, Bartlett said in the statement.
Defense News, an industry publication, first reported Cleveland Ship’s bid on its website yesterday.