BALTIMORE (AP) - Lockheed Martin Corp., the nation's biggest defense contractor, just keeps getting bigger.
The maker of the F-16 fighter and the Trident missile announced Thursday that it is buying Northrop Grumman Corp. for $7.9 billion, adding the stealth bomber and the MX missile to its arsenal.
The deal combines what had been five independent defense contractors just three years ago, and represents yet another round of shrinkage in an industry struggling with decreased military spending since the end of the Cold War.
"This action carries on the monumental changes taking place," said Norman R. Augustine, chairman and chief executive of Lockheed Martin.
The combined company would have annual revenue of $37 billion and 230,000 employees. The deal is subject to approval by regulators and shareholders.
James Fetig, a Lockheed Martin spokesman, said no significant layoffs or major plant closings are expected. In fact, Lockheed plans to hire more than 2,000 engineers out of college this year.
The post-Cold War world has made it virtually impossible for all but the biggest and most efficient defense contractors to survive.
Lockheed Martin is itself the product of a mega-merger, and went on to buy Loral, a defense electronics maker. Northrop and Grumman themselves reached a deal to merge in 1994 and are now the nation's No. 6 defense contractor.
Separately, Boeing and McDonnell Douglas received federal regulators' approval to combine earlier this week.
The purchase of Northrop Grumman, while not the largest defense merger in recent years, may be one of the last mammoth deals for a while.
"There'll be the Big Three U.S. competitors," said Jon Kutler, president of Quarterdeck Investment Partners. Those would be Lockheed/Northrop, Boeing/McDonnell and Raytheon Co., which recently agreed to purchase General Motors' Hughes Electronics.
Northrop Grumman shareholders will get 1.1923 shares of Lockheed Martin common stock for each share of Northrop Grumman. In addition to paying $7.9 billion worth of stock, Lockheed will assume $3.3 billion of Northrop's debt.
Northrop Grumman rose $21.121/2 per share to close at $110 on the New York Stock Exchange. The Lockheed Martin bid is worth $118.19 a share to Northrop Grumman shareholders. Lockheed Martin was down $4.871/2 per share to $99.121/2 .
Over the years, Lockheed Martin and Northrop Grumman have collaborated on the Joint Strike Fighter and early warning systems.
Both have storied histories.
The Northrop side of Northrop Grumman produced the P-61 fighter during World War II as well as the famous Flying Wing bombers. Grumman built the Wildcat and Hellcat fighters during the war and later the craft that landed men on the moon. Lockheed was behind the P-38 Lightning fighter and, later, the U-2 spyplane. Martin made the first U.S.-built bombers.
The modern Lockheed Martin won a contract last year to develop the nation's next space shuttle and another that keeps it in the competition to build America's next light strike-fighter jet.
Northrop Grumman, based in Los Angeles, employs more than 45,000 people and had 1996 sales of about $8 billion. Lockheed Martin, based in Bethesda, Md., employs 190,000 and had annual sales of almost $30 billion.