Morgan Keegan Comments of Valuation Analysis On Northrop Grumman

In a report published by Morgan Keegan, Northrop Grumman NOC plans to spin off its Shipbuilding division by providing to current NOC shareholders one share of the new Huntington Ingalls Industries (HII) for every six shares of NOC.

Morgan Keegan said that HII had pro forma revenue of $6,723 million, pro forma EBITDA of $431 million, and pro forma net income of $135 million in 2010. “Upon spinoff, the new company is expected to have approximately $300 million in cash and $1,880 million in debt. We provide a valuation analysis comparing the new company to the U.S. prime defense contractors, global shipbuilders, and historical acquisitions of shipbuilders, as well as performed a DCF. We have determined an average potential valuation range for the new company of $2.4 - $3.2 billion, or $50 - $65 per share (assuming 48.8 million shares outstanding).”

Northrop Grumman closed yesterday at $64.94.