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It's fitting that Northrop Grumman's (NOC) best-known product is the B-2 stealth bomber. Chairman and CEO Kent Kresa has a knack for sneaking up on his competitors.

That was the case with TRW (TRW), the Cleveland-based conglomerate that got a surprise takeover offer last February. TRW put up a fight, but on July 1 it agreed to a merger after Kresa made a sweetened offer of $7.8 billion in Northrop stock.

The TRW deal faces opposition, chiefly from Lockheed Martin (LMT), which would compete most closely with the combined company. The Pentagon has created a special board to review the deal, but Kresa says he is confident the merger will sail through. "There's no doubt the combination is in the best interest of shareholders, employees, and our national defense," he says.

If completed, the merger will be a final feather in the cap for Kresa, who is expected to step down when he hits age 65 next March. His likely successor? Northrop President Ronald Sugar, a 20-year TRW veteran who joined Kresa's team last year. Despite the swooning stock market, troubled Tyco International (TYC) managed to complete the initial public offering of its huge commercial-finance arm, CIT, on July 1. The $4.6 billion price was well below the $5 billion to $5.8 billion Tyco had hoped to raise--and just 40% of the $11.3 billion it had invested in CIT since last June. Still, Tyco insisted the proceeds from the IPO, combined with $2.5 billion in cash it has on hand, should allow it to meet all of its debt needs at least through November, 2003. Normally cheery employee relations at Southwest Airlines (LUV) appear to be chilling. On July 1, the low-cost carrier and its mechanics' union asked federal mediators to help break a contract deadlock over pay. The mechanics have been represented by the International Brotherhood of Teamsters for 15 years, and the request was the first time the Southwest employees have sought federal mediation. The move came days after union members rejected a final contract offer from the Dallas-based airline. While the company is nowhere near a strike, the move certainly signals that profitable Southwest, which also is in contract talks with flight attendants and pilots, will see more pressure from employees to share the spoils. Three state finance officials representing more than $200 billion in pension and other funds called on brokerage firms to follow the conflict-of-interest principles in the May agreement between New York Attorney General Eliot Spitzer and Merrill Lynch (MER) or risk losing the funds' brokerage business. The treasurers of California and North Carolina and New York State's Comptroller asked securities firms to sever compensation links between research and investment banking. The states will also require brokerage firms and money managers to fully disclose compensation they receive from companies covered by their research departments or in which their firms have invested. Auto makers are trying to kick-start sales after a dismal May. To stoke consumer interest, General Motors (GM) is bringing back its 0% financing program that won over buyers last fall. From July 3 to Sept. 3, GM is giving buyers free financing for all 2002 models except Saturns, Hummers, and Saabs. Industry experts estimate the program will cost GM almost $2,800 a vehicle, nearly $500 a vehicle more than in January. So why do it? When GM used 0% last fall, the company gained half a point of market share in the U.S., pushing its stake to 28.1%. Rival Ford Motor (F) is countering GM's move with rebates between $1,500 and $3,000 or low-interest financing on most models. The resignation of members of the founding Rigas family after charges of self-dealing hasn't ended the infighting at Adelphia Communications. The cable company's former accountants, Deloitte & Touche, charge in a filing with the Securities & Exchange Commission that after the Rigas departures, independent board members withheld key documents that blocked the firm from properly completing its 2001 audit. Deloitte, which was dismissed by Adelphia on June 9, also charges that directors asked it to sign off on the audit without supporting documents. Adelphia, which filed for Chapter 11 on June 26, has since hired PricewaterhouseCoopers as its auditor. Adelphia says it disagrees with Deloitte and will respond in an SEC filing. -- IDT is offering $3 billion for WorldCom's MFS/Brooks fiber unit and $2 billion for MCI.

-- Warren Buffett's Berkshire Hathaway (BRK) will buy apparel maker Garan for $270 million.

-- Merck (MRK) postponed the sale of 19.9% of its pharmacy benefits unit until the week of July 8. The WorldCom aftershocks continue. On July 1, EDS shares fell 18%, to $30.45, after it said WorldCom owed it $150 million for unpaid services and that the telco's collapse could squeeze 2002 revenues and profits. The next day, Moody's Investors Service said it might downgrade EDS's long-term debt rating, partly due to its relationship with the troubled telco.


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