US defence contractor Northrop Grumman acquiring Orbital ATK Inc

US defence contractor Northrop Grumman Corp is set to announce the acquisition of missile and rocket maker Orbital ATK Inc, Reuters reported citing a person familiar with the transaction yesterday.

The deal would come as global attention is focused on missile defence systems with North Korea firing a missile over Japan last week.

With Orbital's stock market valuation of $6.3 billion and $1.4 billion of long-term debt, the final value of the deal is expected to exceed $7.7 billion.

According to US Department of Defense, analyst Byron Callan of Capital Alpha Partners LLC Orbital's rocket motors, missiles and electro-optical countermeasure product lines would enlarge Northrop's offerings to its largest customer.

According to commentators, the deal is significant as it will boost Northrop's exposure to missile defence and also because the company has not bought a large rival in many years. The deal will also represent a departure from a focus of returning earnings to shareholders.

Orbital ATK has contracts with NASA as also the US Army. With the deal, Northrop would get over $4.4 billion in annual revenue according to Orbital's 2016 financials.

According to commentators, despite the strategic mergers, Northrop never hesitated to take bold corporate actions to please investors. In 2011 Northrop spun off its Huntington Ingalls Industries shipbuilding business to shareholders and in 2009, it sold its government services business, TASC.

According to commentators, the acquisition would expand Northrop's product line-up, especially in space.

The contractor is competing for a contract with Boeing, to develop the next ground-based intercontinental ballistic missile defence system in the US, a programme that could be worth as much as $85 billion.

Northrop was recently awarded a contract to build the next generation B-21 stealth bomber.

A deal would ''create a broader company while adding potentially to the strength in areas like potentially the ICBM modernization. It adds to their technological capabilities,'' said Philip Finnegan, director of corporate analysis for Teal Group, a team of defense and aerospace industry analysts, Bloomberg reported.