WASHINGTON — Northrop Grumman is selling off its training services business to Serco for $327 million, as the prime contractor restructures its defense systems division and focuses its business on innovation.
The transaction is expected to close mid-year 2025, the companies said in a statement announcing the deal.
“We continuously evaluate the portfolio to ensure that we are investing in the businesses that are core to achieving our strategic vision. This includes accessing any gaps that may emerge over time or businesses that may make sense to exit. With this in mind, we’ve decided to exit our training services business that is part of defense systems segment,” Northrop CEO Kathy Warden said during an earnings call this morning. “This is an important capability for our customers, and we expect the team to continue to deliver world class training services under new leadership, allowing us to focus on our core business.”
The sale will grow Serco’s revenue in North America to beyond $2 billion and its workforce by about 1,000 employees, adding mission training services and software for satellite ground stations to the company’s portfolio, Serco said in a news release.
Alongside the sale of training services, Northrop has transferred its strike and surveillance aircraft services business from its defense systems division to its aeronautics unit, a move that puts aircraft sustainment in the same portfolio as aircraft development and production. The realignment will allow for a “more seamless development and sustainment of next generation aircraft” in aeronautics while focusing the defense systems portfolio on strategic deterrence systems like the Sentinel, advanced weapons and missile defense, said Northrop Chief Financial Officer Ken Crews.
Northrop’s fourth quarter earnings provided few surprises, with Robert Stallard of Vertical Research Partners calling it a “clean, event free quarter from Northrop.”
Warden, however, did provide some new details on usually-quite-secretive programs like the Sentinel intercontinental ballistic missile system and the services’ next-generation fighter jets.
Northrop is continuing to meet milestones on the Sentinel contract, even as the Air Force “paused work on some small infrastructure efforts in the command and launch” as it considers how to restructure the program in the wake of massive cost overruns, Warden said. Last year, the Pentagon determined that it would continue the program despite an 81 percent increase in cost, and the Air Force is considering reopening pieces of the troubled ground infrastructure portion of the contract up for competition.
Asked about the Air Force and Navy’s next-generation fighter programs, Warden specified that Northrop is “not a prime, but we are a contributor to the program through mission systems” on the Air Force’s Next Generation Air Dominance program. For the Navy’s F/A-XX program, where Northrop is competing as a prime contractor, the company continues to monitor the effort and “would be excited to be selected,” she added. The company has not built either program into its financial guidance.
Last year, Gen. Thomas Bussiere, head of Air Force Global Strike Command, said that the service may need to accelerate or increase its planned buy of B-21 bombers. Asked today whether an accelerated buy would affect pricing of the aircraft, Warden was noncommittal.
“We would work with the Air Force to look at when those units would come into the contract, and obviously we are accumulating more and more actual performance to help inform discussions with them about the right pricing,” she said. “It would be premature for me to comment on where we expect that to land.”
Warden praised the Trump administration for its attention to missile defense issues through its support of an Iron Dome system for the United States, saying that Northrop is “well-positioned to support that architecture.” She also said the company looks forward to engaging with the Department of Government Efficiency headed by Elon Musk.
“I believe we all see that there is room for cost efficiency in the way that we work together between industry and government, and so we’ve embraced the opportunity to share some of our observations and ideas, and are starting to do that,” she said.