Press Release

TRW Board Determines Northrop Grumman’s $47 Exchange Offer Is Financially Inadequate

By SpaceRef Editor
March 12, 2002
Filed under , ,

TRW Inc.
announced today that after careful consideration, including a thorough review
with independent financial and legal advisors, its board of directors has
unanimously determined that Northrop Grumman Corporation’s
March 4, 2002 unsolicited exchange offer for all outstanding shares of TRW
common stock for $47 per share is financially inadequate and not in the best
interests of TRW’s shareholders.
Accordingly, the TRW board of directors
urges TRW shareholders to reject Northrop Grumman’s offer and not exchange
their shares.

“As we indicated when we rejected Northrop Grumman’s earlier proposal,
this is all about shareholder value,” said Philip A. Odeen, TRW’s chairman.

In making its recommendation, TRW’s board of directors considered, among
other things, that:

* Northrop Grumman’s offer grossly undervalues TRW’s businesses and

* The opinion of each of its independent financial advisors, Goldman,
Sachs & Co. and Credit Suisse First Boston, that Northrop Grumman’s
offer is inadequate to the company’s common shareholders from a
financial point of view.

* Northrop Grumman’s offer price remains below the current market price of
TRW’s common stock. As of March 12, 2002, TRW’s closing stock price was
$50.28 per share.

* Northrop Grumman’s offer is highly conditional, which results in
significant uncertainty that the offer will be consummated.

“Our board of directors continues to believe that $47 is grossly
inadequate and does not reflect the value of TRW’s advanced portfolio of
technology and unique market leading positions.
Further, since this offer is
subject to a collar which could result in a price of less than $47 per share,
this offer is less favorable than Northrop Grumman’s earlier proposal,” said
Mr. Odeen.

The board noted that Northrop Grumman made its offer at a time when TRW’s
stock price was temporarily depressed following the unexpected resignation of
David Cote, TRW’s former chairman, president and chief executive officer.

“Northrop Grumman’s offer is clearly an opportunistic attempt to acquire
TRW’s premier franchise.
In particular, the current planned increases in
government defense spending are expected to benefit many technologies and
arenas where TRW’s space, electronics and systems businesses are a leader.
Additionally, we believe that our automotive and commercial aerospace
businesses will benefit from positive economic trends in these sectors,”
continued Mr. Odeen.

TRW’s Value Enhancing Strategic Plan

TRW’s board of directors believes that the company can significantly
enhance value for TRW shareholders through the continued execution of its
strategic plan.
As part of this plan, TRW intends to accelerate its debt
reduction program and separate its Automotive business in a tax-efficient
Key elements of the plan include:

* Acceleration of TRW’s deleveraging initiatives through asset sales and
other alternatives. In 2001, the company reduced its net debt by almost
$1 billion and, over the past three years, it has reduced net debt by
approximately $3.9 billion. The company is targeting an additional
$1.6 billion to $2.0 billion debt reduction in 2002.

* Exploration of additional actions, including the spin-off of TRW’s
Automotive business. As planned, the Automotive business would become
an appropriately capitalized, independent, publicly traded company. TRW
has targeted completion of the spin-off of the Automotive business in
approximately six to nine months.

“TRW has been examining a potential separation of our Automotive business
for some time,” added Mr. Odeen.
“We believe that our strategic plan
announced today will create two ‘pure play’ independent businesses, each
positioned to deliver superior growth and returns.
Additionally, this plan
will enable each company to optimize strategic and financial flexibility and
capture value against best-in-class industry benchmarks.
We believe our
strategic plan will deliver greater value to TRW shareholders than Northrop
Grumman’s offer.”

Since the announcement of Northrop Grumman’s proposal on February 22,
2002, TRW and its independent financial advisors have received unsolicited
indications of interest from third parties with respect to a transaction with
the company as a whole which would involve a separation of the Automotive
In addition, the company has received unsolicited indications of
interest from third parties with respect to each of its operating businesses
as well as a private equity investment in the entire company.
Also, TRW is
engaged in preliminary discussions with third parties concerning transactions
involving all or a portion of the Automotive business, and the company has
commenced preliminary negotiations for a potential sale of its Aeronautical
Systems Group.

TRW Is Well Positioned To Capitalize On The Positive Economic Trends
Across Auto, Defense and Aerospace Businesses

* Given positive recent economic trends, industry analysts have raised
their forecast for 2002 North American automotive light vehicle
production from between 15.0 million and 15.3 million vehicles to
between 15.7 million and 15.9 million units. TRW holds the number one
or two market positions in the worldwide supply of key automotive
products, including seat belts, air bags, antilock brakes (North
America) and steering gears, and is well positioned to capitalize on
this market growth.

* The United States defense budget is projected to have a 7.2% compound
annual growth rate through 2006, and TRW’s space and defense businesses
are in the “sweet spot” of this growth. TRW’s capabilities in space,
defense and communications are aligned with the U.S. Defense
Department’s focus on information superiority, missile defense,
battlefield superiority and homeland security.

* According to a recent report from a leading trade organization for
airlines in the United States, the commercial aerospace sector appears
to have stabilized. TRW believes this will enhance its spares and
maintenance, repair and overhaul businesses.

TRW Is On Track To Deliver Sustainable Earnings And Cash Flow Growth

The board and senior management of TRW are committed to continuing to
focus on the company’s aggressive cost cutting initiatives, productivity
improvements and enhancing relationships with its customers.
The company is
on track to meet or exceed its 2002 commitments.

The company affirmed that the board’s executive search committee,
comprised of outside directors, has selected a prominent executive search firm
and is actively engaged in a search for a new chief executive officer.

Special Meeting of Shareholders Set

TRW also announced today that its board of directors has called a Special
Meeting of TRW shareholders for Monday, April 22, 2002 for the purpose of
voting under Ohio law on Northrop Grumman’s proposed control share
Shareholders of record on the close of business on March 28,
2002 will be eligible to vote at the special meeting.

TRW noted that it expects to furnish shareholders with a notice of meeting
and related proxy statement later this month.

Goldman, Sachs & Co. and Credit Suisse First Boston Corporation are
serving as financial advisors to TRW, and Skadden, Arps, Slate, Meagher & Flom
LLP is serving as legal counsel.

TRW provides advanced-technology products and services for the aerospace,
systems, and automotive markets.

Certain of the information contained in this press release should be
considered “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995 which is subject to a number of risks
and uncertainties.
The preparation of forward-looking statements requires the
use of estimates of future revenues, expenses, activity levels and economic
and market conditions, many of which are outside the Company’s control.
Company’s results could be affected by the ability to obtain new contract
awards; the level of defense funding by the government and the termination of
existing government contracts; pricing pressures from customers; moderation or
decline in the automobile build rate; changes in consumer debt levels; work
stoppages; unanticipated downturn in the financial condition of, or business
relationships with customers or suppliers; the ability to reduce the level of
outstanding debt from cash flow from operations and the proceeds from asset
dispositions; a credit rating downgrade; increase in interest rates; customer
recall and warranty claims; product liability and litigation issues; changes
to the regulatory environment regarding automotive safety; the introduction of
competing products or technology by competitors; the ability to attract and
retain skilled employees with high-level technical competencies; the financial
results of companies in which we have made technology investments; the
availability of funding for research and development; economic, regulatory and
political domestic and international conditions; fluctuations in currency
exchange rates; and the impact of additional terrorist attacks, which could
result in reduced automotive production, disruptions to the transportation
system, or significant and prolonged disruption to air travel.
In addition,
there can be no assurance: (i) that an agreement relating to any investment in
the Company, or relating to any sale or other distribution of all or a part of
the Company’s operating businesses will be reached, or that if an agreement is
reached, that the transactions contemplated by such agreement will be
consummated; (ii) that the Company will spin off the Automotive business or
that such spin-off will be complete within six to nine months; (iii) that the
Company will be successful in delevering the Company, or that the methods
described for delevering will be utilized; (iv) as to the amount by which debt
will be reduced; (v) that the Company’s strategy will deliver any particular
level of value to TRW shareholders; (vi) that defense spending will rise and
research, development, test and evaluation budgets will increase; (vii) that
the commercial aerospace industry will stabilize; (viii) that North American
2002 light vehicle production will increase from 2001 levels; (ix) that 2002
earnings per share estimates will be met or exceeded; (x) with respect to the
expected amounts of the Company’s operating cash flows in 2002, that such
amounts will be utilized to delever the Company’s balance sheet; (xi) with
respect to the amounts that will be realized, if any, by the Company from
divestitures; (xii) with respect to the amount of sales, earnings per share or
cash flow that will be realized by the Company in 2002; and (xiii) that the
Company’s costs will decrease in 2002.
Other factors and assumptions not
identified above are also involved in the preparation of forward-looking
statements, and the failure of such other factors and assumptions to be
realized may also cause actual results to differ materially from those
The Company assumes no obligation to update such estimates to
reflect actual results, changes in assumption or changes in other factors
affecting such estimates other than as required by law.

The directors and certain executive officers of TRW may be deemed to be
participants in the solicitation of proxies from shareholders of TRW in
connection with TRW’s special meeting of shareholders under the Ohio Control
Share Acquisition Statute.
Information concerning such participants is
contained in TRW’s definitive proxy statement relating to TRW’s 2002 Annual
Meeting filed with the Securities and Exchange Commission on March 4, 2002 on
Schedule 14A.

This press release relates to Northrop Grumman’s exchange offer commenced
March 4, 2002.
Shareholders of TRW are advised to read TRW’s
Solicitation/Recommendation Statement on Schedule 14D-9, filed March 13, 2002,
as it may be amended from time to time, and TRW’s PROXY STATEMENT FOR THE
Shareholders of TRW and other interested parties may obtain,
free of charge, copies of the Schedule 14D-9, TRW’s proxy statement and other
documents filed by TRW with the SEC at the SEC’s internet website at
Each of these documents may also be obtained, free of charge, by
calling investor relations at TRW at 216-291-7506.

Financial Teleconference and Webcast:

TRW will host a conference call on March 13, 2002 at 9:45 a.m. EST to
discuss this announcement.
Investors, the news media, and others may listen
to the teleconference by calling 888-324-8503, from within the United States,
or 712-271-3869, internationally.
Please call at least 15 minutes prior to
the start of the teleconference and ask to be connected to the TRW conference
A recording of this call will be available beginning at 1:00 p.m. EST
on March 13, 2002 through 4:00 p.m. EST on March 20, 2002 and can be accessed
by dialing 800-945-0304 from within the United States, or 402-220-3526
internationally. The rebroadcast passcode is 3182067.

The teleconference will also be Webcast at by clicking on an available audio link.
Microsoft Media Player is required to access the Webcast.
It can be
downloaded from .
This Webcast will be
archived on the company’s web site for replay purposes beginning on March 13,
2002 through March 20, 2002.

SpaceRef staff editor.