U.S. defense contractor Northrop Grumman (NYSE:NOC) has announced plans to buy missile and rocket maker Orbital ATK (NYSE:OA) for about $7.8 billion in cash. Northrop will also assume $1.4 billion in Orbital’s net debt. Orbital ATK shareholders will receive $134.50 per share, a 22 percent premium to the company’s Friday closing price of $110.04.

Orbital ATK is based in Dulles, Virginia. The company was created in 2014 from a merger of Orbital Sciences and Alliant Techsystems’ rocket propulsion and missile systems. Orbital’s main businesses include missile defense and government satellites.

The acquisition would establish Orbital as a new, fourth business sector under Northrop. In a statement, Northrop Chief Executive Wes Bush said the companies’ complementary businesses will help increase revenue, boost efficiency, and save money. Northrop’s other businesses include aerospace systems, mission systems, and technology services.

Activity in the defense sector is heating up amid rising global tensions. A Saudi Arabia-led coalition, supported by the U.S., has been carrying out airstrikes in Yemen since March 2015. North Korea is testing threatening missiles, prompting the U.S. military to fly advanced bombers and stealth jets over the Korean Peninsula.

The acquisition of Orbital would strengthen Northrop Grumman’s capabilities in military aircraft technology and build up Northrop’s space operations. Orbital is one of two companies hired by NASA to fly cargo to the International Space Station under an initial contract worth up to $3.1 billion. The Air Force has called for proposals to replace its aging nuclear cruise missiles and intercontinental ballistic missile (ICBM) system.

The boards of both companies have approved the deal. The transaction is expected to close in the first half of 2018. The speed of the board’s approval was surprising. Northrup has not made a large acquisition in several years. Its last purchase was of TRW in 2002 for about $7.8 billion.

Shares of Orbital ATK surged 20 percent in Monday premarket trading. Orbital’s shares were trading at $131.75 before the bell. Northop was unchanged in Monday premarket trading. Perella Weinberg Partners is the financial adviser to Falls Church, Virginia-based Northrop, while Citigroup is advising Orbital.

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