General Dynamics Buys Shipyard Defense Contractor Cuts Deal To Acquire Bath Iron Works

General Dynamics Corp. said Thursday it has an agreement to buy venerable Navy shipbuilder Bath Iron Works for $300 million, continuing a post-Cold War shakedown in the U.S. defense industry.

Bath Iron Works, Maine’s largest private employer with 8,300 workers, will keep its 111-year-old name and join General Dynamics’ marine division.

Known as BIW, the company traces its history to an iron foundry and has turned out an America’s Cup-winning yacht, 84 World War II destroyers and the first ship of 10 of the Navy’s 20 classes of surface combat ships. It now builds Aegis destroyers for the Navy.

BIW will come out of the acquisition debt-free for the first time since a much more costly buyout in 1986 and it will be under the ownership of a company that understands the shipbuilding business, said James R. Mellor, General Dynamics’ president and chief executive.

The Falls Church, Va.-based General Dynamics owns Electric Boat, a Groton, Conn., submarine builder, along with a division in Sterling Heights, Mich., that builds the M1 Abrams battle tank.

In the takeover, the companies will combine resources to invest in new technologies and become more efficient, Mellor said.

“Defense dollars are scarce, as you all well know,” Mellor told reporters in Portland. “Companies that are financially strong and can provide the right technology at the right price are going to succeed.”

The acquisition will boost General Dynamics revenues and earnings for shareholders by about 30 percent, Mellor said.

Investors applauded the deal, with General Dynamics stock up $3, or 6.1 percent, at $52.12-1/2 on the New York Stock Exchange.

“This fulfills my dreams and my hopes for our company, and I want our employees to know this permits us to look at the future with a great deal of optimism,” said Duane “Buzz” Fitzgerald, Bath’s president and chief executive officer.

The impending deal was rumored since April, but the final details of the purchase were not completed until Wednesday night. The boards of both companies have approved the acquisition.

General Dynamics has just emerged from a period of restructuring that included thousands of layoffs and the sale of its missile, space launch systems and fighter divisions.

It is poised for additional acquisitions with $1 billion in cash reserves before the Bath purchase, Mellor said.