Justice Sues To Stop Lockheed Deal Officials Say Grumman Purchase Could Hurt National Defense

The Justice Department sued today to block Lockheed Martin Corp.’s $8.3 billion acquisition of Northrop Grumman Corp. after Pentagon officials concluded the deal “is not in the best interests of this department.”

The lawsuit said the deal “would substantially lessen, and in several cases eliminate, competition in major product markets critical to the national defense.” It was filed in U.S. District Court here after a last-minute restructuring offer by the companies over the weekend failed to meet the government’s objections.

“If this merger were to go forward, America could face higher prices and lower quality in advanced tactical and strategic aircraft, airborne early warning radar systems, sonar system, and several types of countermeasure systems that save our pilots from being shot down when they are flying in hostile skies,” Attorney General Janet Reno told a news conference.

“We want to ensure that any defense merger protects our soldiers’ lives and our taxpayers’ wallets.”

Justice Department antitrust chief Joel Klein said the government was still open to further negotiation with the companies on a settlement that might avoid trial, but he noted “there’s a significant gap” between the sides.

Defense Secretary William Cohen wrote Reno today that the deal raised a series of competition and conflict problems that “cannot be addressed adequately” through an agreement on divestitures and contracting rules.

Cohen noted that “these problems are an outgrowth of the significant consolidation in the defense industry that has taken place in recent years.”

The deal would harm competition in critical defense electronics, including electronic warfare, airborne early warning radar and naval and undersea warfare, Cohen wrote.

The Pentagon would be best served, Cohen said, “if Lockheed Martin and Northrop Grumman do not merge.”