Combining the two firms would create a giant with sales of approximately 27 billion dollars, excluding TRW's automotive business, to be split off by Northrop if the deal goes through.

Such a merger would push Northrop ahead of Lockheed-Martin, which posted 24 billion dollars in revenues last year, in the ranks of defense industry titans.

It would also give Northrop access to TRW's coveted laser technology to be used in space-based systems to track and destroy enemy missiles, something likely to be expanded by the administration of President George W. Bush.

The 47 dollar-per-share offer is an 18-percent premium over TRW's closing price Thursday of 39.80 dollars, but TRW said its share price was "aberrationally" low following the recent departure of its chief executive.

Northrop maintained, however, that the offer is 22 percent above the average trading price for the last 12 months and four percent over the highest closing price for the last year.

"We believe the strategic combination of Northrop Grumman and TRW will provide tremendous value to the shareholders of both companies," said Kent Kresa, Northrop Grumman's chairman and chief executive officer, adding he did not believe the merger would pose any antitrust concerns.

"Northrop Grumman's electronics and systems integration capabilities, combined with TRW's space and systems expertise, would create a strong contributor to the nation's satellite and missile defense requirements."

Analysts said the deal could benefit both firms, especially TRW, which has been struggling in some sectors.

"Given our unfavorable view of TRW's automotive businesses and significant debt load, we are inclined to take this announcement as wonderful news for TRW shareholders," said Morningstar's Josh Peters.

TRW said its board "will address the Northrop proposal in order to determine the appropriate course" to best serve the interests of TRW's shareholders and other constituencies.

But it also expressed "regret" that Northrop Grumman chose to make this proposal following the unexpected departure of TRW's chief executive officer, David Cote, and the "aberrationally low stock price that resulted."

Cote on February 19 announced he would take over as chief executive officer at Honeywell, a decision that surprised many.

Northrop Grumman is among the largest US defense groups, boasting 18 billion dollars in revenues. It recently acquired nuclear submarine maker Newport News Shipbuilding.

TRW shares leapt 26 percent after the bid was announced to close at 50.30 dollars, while Northrop shares fell 6.66 percent to 109.95 dollars.

The possible separation of TRW's automotive unit prompted speculation about an acquisition by others in the field.

Sweden's Autoliv said it had no intentions of bidding for the unit, adding that a combination might raise antitrust questions.

"We would run into anti-trust problems. We have a third of the world market, and they (TRW) have a quarter," said Mats Odman, head of corporate communications at Autoliv.

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