said it has agreed to buy
Newport News Shipbuilding
for $2.1 billion in cash, a merger that would create the sole maker of U.S. Navy aircraft carriers and submarines.
Under the terms of the deal, defense contractor General Dynamics will pay $67.50 for each Newport News share outstanding, which is a 23% premium over the stock's Tuesday closing price of $55.05. General Dynamics will also assume about $500 million of the company's debt. The companies expect to close the transaction in the third quarter, providing regulators approve the deal.
Shares of Newport News lately gained $7.95, or 14.4%, to $63, and earlier reached a 52-week high of $63.40 on the
New York Stock Exchange
. General Dynamics recently dipped $1.81, or 2.4%, to $72.30.
"Combining our companies will provide our customers with significant cost savings to support the nation's need to build more nuclear ships," Newport News Chief Executive William Fricks said in a jointly prepared statement. Newport News, which has been the only builder of the Navy's aircraft carriers for the past 40 years, is one of only two U.S. companies capable of building nuclear subs.
Separately, Newport News reported first-quarter earnings of $24 million, or 75 cents a share, easily exceeding Wall Street's expectations of 64 cents. The company earned $21 million, or 63 cents a share, in the same quarter a year ago. The company also raised its 2001 earnings forecast, excluding costs associated with the proposed merger.