US defense group Northrop Grumman is poised to buy out smaller rival Orbital ATK in a deal worth $7.5 billion, according to the Wall Street Journal.

The deal, which comes around two weeks after industrial conglomerate United Technologies acquired aerospace supplier Rockwell Collins in a $30 billion deal, could be formalized by Monday, the paper said, quoting sources close to the matter.

Northrop is valued at $46.5 billion, while Orbital is valued at $6.3 billion.

The potential transaction comes amid high tensions with North Korea and as American defense firms are under pressure to maintain their profit margins while customers demand better value for money.

In 2015, Northrop won an $80 billion mega-contract from the US military for the Long Range Strike Bomber planned for the mid-2020s.

Orbital specializes in making rocket launchers and missiles, including for Elon Musk's SpaceX.

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