29 June 2012
Portsmouth, VA, 29 June 2012
General Dynamics Corp. is talking with Portsmouth-based Earl Industries LLC about acquiring three of its business units, including its two ship-repair operations, in a deal that is expected to become final by the end of the summer.
The deal would give General Dynamics its second shipyard in Hampton Roads.
In the fall, it bought Metro Machine Corp., which employed 400 people on the Berkley riverfront across from downtown Norfolk. Metro Machine is now known as General Dynamics NASSCO Norfolk.
“General Dynamics and Earl Industries are negotiating the terms of an acquisition agreement that would result in the ship-repair and coatings operations becoming part of General Dynamics,” said Rob Doolittle, a spokesman with Falls Church-based General Dynamics, on Thursday.
Jerry Miller, president and owner of Earl Industries, declined to comment.
The talks are expected to be completed very soon, with a financial close on the acquisition anticipated “sometime later this summer,” Doolittle said.
“The terms are all confidential,” he added.
General Dynamics would acquire three of Earl’s five business units under the deal – its ship-repair facilities in Portsmouth and Mayport, Fla., as well as its coatings division in Portsmouth. Earl would still have two other divisions – precision manufacturing in Portsmouth, and integrated power and controls in Chesapeake.
The units General Dynamics would acquire employ about 575 workers, who would become General Dynamics NASSCO employees when the deal is finalized, Doolittle said.
“It’s a prime contractor for nuclear aircraft-carrier maintenance and repair in the Norfolk area and they also support frigates and other ships in the Norfolk and Mayport area,” he added.
On June 15, General Dynamics and Earl filed an application with the Federal Trade Commission, seeking a review of the proposed deal under a federal program that took effect in 1978, requiring parties to certain mergers and acquisitions to notify the commission and the Justice Department before finalizing any agreement.
The application is followed by a mandatory review period of 30 days. The review can be shortened by the granting of an “early termination” notice, which General Dynamics and Earl received Wednesday.
The notice essentially means the commission had no comment on it, allowing the deal to move forward, Doolittle said.
The FTC and the Justice Department partner on the reviews, so the early-termination notice was issued of behalf of both agencies, he added.
Earl’s would be the third major South Hampton Roads ship-repair operation to be owned by a major defense contractor. The former Norshipco in Norfolk is now owned by Arlington-based BAE Systems Inc., a subsidiary of BAE Systems PLC, headquartered in Britain.
Earl hit a rough patch in May 2011, when the Navy announced that it was terminating a five-year maintenance contract with the company for work on the San Antonio-class of amphibious warships.
Earl’s LPD-17 “multi-ship, multi-option,” or MSMO, contract – a kind of one-stop-shopping relationship in which a single shipyard handles maintenance on a class of ships – had begun only a few months earlier, on Jan. 7, 2011, and was supposed to run five years.
Earl valued it at $75 million.
“The company’s performance on this contract was not in keeping with the type of quality work the Navy expects from our industry partners,” Vice Adm. Kevin McCoy, who heads Naval Sea Systems Command, said in a statement at the time.
Earl had been working on the San Antonio under another contract since December 2009, Miller, the company’s president, said last year.
He said it was unfair for the Navy to cancel the MSMO contract based on problems with the earlier contract, which did not allow for proper planning.
The Navy contracted with Earl in late 2009 to repair the engines on the San Antonio, which had been beset by design and construction defects since its commissioning in 2006.
The engine repair “grew into a complex overhaul on multiple ship systems… due to continuous discovery of new work and correction of newly discovered new construction defects,” Earl said in a statement last year.
This article was originally printed in The Virginian-Pilot, http://pilotonline.com/business/defense-shipyards/general-dynamics-in-talks-to-buy-part-of-earl-industries/article_0542f93b-712f-5f8c-bac2-a89a68057508.html