October 24, 2001
DOJ files suit to block GD acquisition of NNS
The way now appears open for Northrop Grumman to acquire Newport News.
The Department of Defense said yesterday that it had completed its review of both the General Dynamics Corp. and Northrop Grumman Corp. acquisition proposals.
DoD concluded that the proposal by General Dynamics would eliminate competition for nuclear submarines, resulting in a monopoly. Additionally, the acquisition would harm competition for surface combatants and for the development of emerging technologies for both nuclear submarines and surface ships.
The department determined that the benefits and savings offered by each transaction were comparable. The Northrop Grumman transaction had the additional benefit of preserving competition.
The Department of Justice was swift to file an antitrust lawsuit to block the proposed General Dynamics acquisition. The DoJ said that if the merger were allowed to proceed, it would eliminate competition for nuclear submarines a weapon platform of vital importance to the security of the United States resulting in a monopoly.
Additionally, the Department said the proposed acquisition would harm competition for other military ships conventionally powered surface combatants and for the development of electric drive, an emerging technology for powering nuclear submarines and surface combatants.
The Department of Justice said it had coordinated with DoD in the investigation that resulted in the lawsuit.
"This merger would give General Dynamics a permanent monopoly in nuclear submarines and would substantially lessen competition in surface combatants," said Charles A. James, Assistant Attorney General in charge of the Department's Antitrust Division. "Our armed forces need the most innovative and highest quality products to protect our county. This merger-to-monopoly would reduce innovation and, ultimately, the quality of the products supplied to the military, while raising prices to the U.S. military and to U.S. taxpayers."
The Department filed its lawsuit in U.S. District Court in Washington, D.C.
General Dynamics, in a cash tender offer, planned to purchase a controlling share of Newport News for approximately $2.6 billion. The two companies are the only manufacturers of nuclear submarines and two of only three companies that build large ships of any kind for the U.S. Navy. The companies are also leaders on the only two teams working to develop electric drive technology for nuclear submarines and surface combatants.
"We greatly appreciate the assistance of the Department of Defense in investigating this matter," added James. "Justice and Defense are united in the view that the proposed merger should not go forward, and that competition plays an important role in ensuring that the United States can purchase the best platforms and systems to protect our country."
Singapore yards talk merger
The managements of Keppel Corporation and SembCorp Industries say they are holding discussions on the rationalization of the Singapore shipyard industry and the possibility of other collaborations between the two groups.
"All discussions are at a preliminary stage and may or may not come to fruition," says a statement, "However, these discussions are being held with the understanding that all arrangements must make business sense and create value for shareholders."
Shareholders of the two companies are therefore advised not to take any actions which may be prejudicial to their interests. Announcements will be issued publicly should there be any material developments.
FOE buys an Aker H-3 accommodation unit
Fred Olsen Energy has entered into an agreement with Transocean Sedco Forex to purchase Rig 82 (ex- Polymariner, ex- Allegeheny) for $5.6 million. The 1975 -built Aker H-3 semisubmersibleand is currently laid up at the Ølen ship yard in Norway.
Until 1996 the rig was operated in the accommodation market. It has no drilling equipment.
Rig 82 will supplement the Borgila Dolphin to provide various services in the offshore support market. However, FOE also says that by securing the rig at this price level it has a cost efficient entry for its plans to compete in the floating production segment with its concept of a Dry Completion Unit (DCU) based on the Aker H-3 design.
Revised delivery date for second Ocean Rig unit
Ocean Rig's second rig, Eirik Raude, is currently being completed at the Halifax Shipyard (Irving Shipbuilding, Inc.) in Nova Scotia.
Since the rig arrived in Halifax, the yard and Ocean Rig been working to establish an updated delivery schedule for the unit. They have now developed a detailed project plan which estimates that Eirik Raude will be mechanically complete, and leaving the yard for sea trials, at the end of the first quarter of next year. Operations of the rig are now estimated to commence in second quarter 2002.