Secretary of Defense William S. Cohen today advised the Department of Justice that the Department of Defense opposes the proposed acquisition of the Northrop Grumman Corp. by the Lockheed Martin Corp. as not being in the best interests of the Department or the public.
The Department reached its decision after a comprehensive review of the transaction and its effect on the DoD.
The Department examined ongoing and anticipated programs as well as markets where the two companies compete.
In a letter to Attorney General Janet Reno, Secretary Cohen stated: "The proposed transaction increases market concentration and adversely affects competition in a number of critical areas of defense electronics.
These areas include electronic warfare, airborne early warning radar, and naval and undersea warfare. . . .
In addition, the proposed transaction creates unprecedented problems of vertical integration throughout the electronics area."
Secretary Cohen also said that: "Because of the extensive nature of these problems--both horizontal and vertical--we have also concluded that partial solutions addressing individual competitive issues will not be adequate."
The Secretary's letter also said that the Department found that: "This transaction was the most complicated and difficult that we have reviewed to date.
No previous merger has raised so many interrelated problems across so many markets.
These problems are an outgrowth of the significant consolidation in the defense industry that has taken place in recent years."
The Department also found that Northrop Grumman has a profitable aircraft business.
Regarding this, Secretary Cohen stated: "The proposed transaction reduces the prospect for innovation and the likelihood of alternative teaming arrangements in aircraft programs."
Secretary Cohen also observed that additional consolidation in the defense industry may be beneficial, and the Department of Defense will continue to support such consolidation when such transactions do not adversely affect competition.
During the review, DoD staff worked closely with the staff of Justice Department's Antitrust Division.
In his letter, Secretary Cohen praised the continuing cooperation of the two agencies in serving the public interest.
A copy of Secretary Cohen's letter is attached .