Orbital ATK (OA 131.95, +21.91) has spiked 19.9% in pre-market after agreeing to be acquired by Northrop Grumman (NOC 267.03, 0.00) for $134.50 per share in cash or $9.20 billion.
Under the agreement, Northrop Grumman will assume $1.40 billion in net debt while shareholders of Orbital ATK will receive $134.50 per share.
Orbital ATK designs, builds, and delivers space, defense, and aviation systems while Northrop Grumman provides autonomous systems for land, sea, air, and space vehicles.
Orbital ATK, who is expected to generate between $29.50 billion and $30.00 billion in 2017 sales, will become Northrop Grumman's fourth business segment. It is expected that the transaction will become accretive to Northrop Grumman's earnings in the first full year after closing. Annual pre-tax cost savings are expected to reach $150 million by 2020.
Northrop Grumman expects that the acquisition will result in significant value creation since the two companies have complementary product portfolios.
The transaction has been approved by the Boards of Directors of both companies and closing is expected in the first half of 2018.