This is a partial transcript from Your World with Neil Cavuto, July 1, 2002, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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NEIL CAVUTO, HOST: After months of disputing over a possible deal, Northrop Grumman and TRW are finally getting together. The once reluctant TRW agreeing to be scooped up for about $7.8 billion in stock. The deal makes Northrop the second largest defense contractor in the US of A.

Joining me now are the two bigwigs behind this deal, Kent Kresa, the chairman and the CEO of Northrop Grumman; and Philip Odeen, the chairman of TRW.

All right. Kent, to you first. This guy was fighting you. What was the deal here? What was the hold up?

KENT KRESA, CHAIRMAN & CEO, NORTHROP GRUMMAN (NOC): Well, he was working very hard for his shareholders. He, I'm sure, felt that there was more value than we were offering. And, frankly, when we due diligence, we agreed with him.

CAVUTO: All right.

KRESA: So, once that occurred, once we got past due diligence, once we understood the company, we were really excited about it.

CAVUTO: Why did it drag on for so long? Was it a set figure in your mind or are were you just waiting until he got a figure closer to your mind?

PHILIP ODEEN, CHAIRMAN, TRW (TRW): No. It took a little while, but we, from the very beginning, felt that the issue of shareholder value is not Northrop Grumman. We have a fine relationship with them, and the question was when they got to the point where our board said, hey, there is more shareholder value in accepting this offer, we obviously said yes. We think it's a great deal for our shareholders, a great deal for our people as well. We are very excited about the this opportunity.

CAVUTO: There is a perception that you could have overpaid. What do you tell your shareholders in the combined entity that you did not?

KRESA: Well, we did a very detailed due diligence and we looked at what the value is. It is clearly within the range that we thought made sense. We have always said that we will pay fair value for a company, but we won't over pay. And certainly, it is in the same category as some of the other acquisitions we've made.

Everybody thinks when you make the acquisition that maybe you overpaid, that was true when we acquired Westinghouse, when we acquired every company. But you have to look at the figures, what is going to happen for the company. We have double-digit growth coming after the acquisition. We have confirmed our earnings for this year. We said we're going to have double-digit growth the next year and the year after that. So this is a powerhouse company.

CAVUTO: Now, on a day like this, of course, it's not your fault, but the Street sold off, the Dow off better than 130 points. I mean, both of your stocks were down on this news today. Is the market saying after both of your heady performances for both of the stocks that the good days are behind you?

ODEEN: Oh, I do not think so. As you said, it was a tough day, and the markets just already absorbed this news. As Kent said, we believe the combination is a powerful one and we think it's going to lead to very strong growth. And I am confident that as the analysts and others have a chance to look at this and really understand the story, they are going to be very positive.

CAVUTO: Defense, anyone having to do with defense, have done extremely well in this market, certainly post-September 11. But there are the analysts, who are short stocks like yours, who say too much, too fast. What do you say?

KRESA: Oh, I say everybody has a view. We happen to believe that with the marketplace we are in, the growth and the budgets that we are seeing, the great concern now about homeland security, which was not even a issue 12 months ago, that is a whole new market for us. So we see this as a tremendous growth opportunity. All the programs we have in place, we had growth before the acquisition. We are going to have even more growth with it.

CAVUTO: Philip, you agree with that?

ODEEN: Absolutely. We feel very bullish about the market, and we're having a great year as well. Our earnings are up 24 percent in the first quarter. We expect to do about that well in Q2. We have had a super year, and I think it makes us an even stronger addition to the Northrop Grumman team.

CAVUTO: You know, I know you guys keep one eye on Washington very closely. There is a feeling that we are running out of money in these budgets. We are going to bigger and bigger deficits and that we've got to either revisit tax cuts or we've got to pair other programs. Do you get worried when all this money that's been making it your way suddenly dries up or slows down?

KRESA: We have been in a downward turn for many, many years...

CAVUTO: Defense spending.

KRESA: Defense spending, and that has turned. And it has to turn. We have to recapitalize our defense capabilities. We have got to do that.

CAVUTO: Al Gore says that the president is botching this whole terror campaign, essentially.

KRESA: Well, I can't comment on that. I do not happen to agree with Al Gore, but let's say that there wasn't this terrorism campaign right now. There still is the concern about our defense capabilities, and do we have the kind of systems that we need to keep our soldiers and sailors and airmen safe. And some of these systems are 60, 70, 80 years old. We just have to change that and we have to recapitalize. So, independent of all of these issues of war and terror, which adds a whole other dimension to the issue, we still have the problem of we have got to recapitalize our...

CAVUTO: So, you are not going to trash Al Gore or anything...

KRESA: Absolutely not. I wouldn't do that.

ODEEN: Let me add one comment. I think, you know, they are going through a real transformation at the Pentagon, and the transformation toward electronic capabilities, information technology, reconnaissance, surveillance. And that is what this combined company does. We are right on the sweet spot of defense spending for the next many years.

CAVUTO: Well, congratulations gentlemen, Philip Odeen and Kent Kresa. Again, good seeing both of you.

KRESA: Thank you.

ODEEN: Thank you.

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