TRW Shareholders Vote to Open Books for Northrop

At its annual meeting on Wednesday,

TRW

(TRW)

shareholders voted to give defense contractor

Northrop Grumman

(NOC) - Get Report

access to its financial books.

TRW shareholders rejected two other proposals from Northrop Grumman, however. Those proposals, if they had been accepted, would have created an independent committee of directors to evaluate Northrop's takeover bid for TRW and asked that shareholders decide for themselves whether to pursue the deal.

"I think the vote went quite well for Northrop," said Paul Nesbitt, an analyst at JSA Research, an aerospace research firm. "They are probably getting the one thing that they were really after."

In his comments Wednesday, Kent Kresa, chief executive of Northrop Grumman, said, "TRW shareholders have sent a strong message to its board of directors today in favor of allowing Northrop Grumman to begin due diligence in connection with its proposed acquisition of TRW."

A week ago, Cleveland-based TRW rejected a sweetened $53-a-share buyout offer from Northrop Grumman, saying it was financially inadequate. At that price, TRW would have been valued at about $6.8 billion. Since that time, TRW's stock has risen above the $53 offering price, in an indication that shareholders are expecting a better deal to come.

In March, TRW turned down a $47-a-share unsolicited bid from Northrop, saying Northrop was trying to take advantage of the stock's decline to around $39 in the wake of the departure of former TRW chief David Cote. Before Cote left TRW, in mid-February, the stock was trading at about $45 a share.

"We are delighted with the outcome of today's vote and the confidence demonstrated by our shareholders not only in the TRW board, but also in the strategic direction of our company," Philip Odeen, chief executive of TRW, in a statement. "With respect to Northrop's proposal on access to nonpublic information, we are not surprised that it may have passed by a small margin."

On Monday, TRW said that it had signed a confidentiality agreement with another company, which will also be given access to the company's books. TRW didn't release the name of that firm.

Still, some analysts were optimistic a deal with Northrop would ultimately go through at a higher price.

"Northrop is a wily negotiator," said Brett Hoselton, an analyst at McDonald Investments. "I think they are prepared to raise their offer, but they're looking for fair and reasonable justification to do so."

In Wednesday's trading, TRW ended down 0.6% at $54.50, while Northrop was off 0.8% at $116.49.