29/08/2013 05:15:00

Northrop Grumman to Buy Qantas Defense Unit

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Northrop Grumman Corp. (NOC) on Wednesday agreed to buy the defense unit of Australian flag carrier Qantas in a deal that highlights the drive for defense contractors to boost revenues and their international exposure at a time of declining global military budgets.

The fifth-largest U.S. military contractor by sales is paying an undisclosed sum for Qantas Defence Services, or QDS, which provides support and maintenance for customers including the Royal Australian Air Force and services aircraft carrying government dignitaries.

Northrop Grumman generated around 10% of revenues from overseas military customers last year, lagging its big U.S. rivals, and the proposed deal highlights efforts to tap into faster-growing defense markets in Asia and the Middle East as the Pentagon and its suppliers scramble to handle ongoing automatic budget cuts and lingering uncertainty over future budgets.

The move also provides funds and focus for the efforts by Qantas Airways Ltd. Chief Executive Alan Joyce to stem losses at the airline's loss-making international business and invest in a domestic operation that's facing ever-fiercer competition.

"QDS complements our current integrated logistics and modernization efforts and advances our international strategy," said Wes Bush, Northrop's chief executive, in a statement.

The Qantas business employs more than 300 staff, supporting the Australian air force tanker refueling fleet, government VIP aircraft and navy patrol planes, Northrop said in its statement.

The unit last month also won a contract to refurbish four Lockheed Martin Corp, C130 military transport planes--formerly operated by the Royal Australian Air Force--for the Indonesian air force.

Write to Doug Cameron at doug.cameron@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

August 29, 2013 00:15 ET (04:15 GMT)

Copyright (c) 2013 Dow Jones & Company, Inc.

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