Competition regulators in the USA will not oppose the proposed acquisition of rocket engine manufacturer Aerojet Rocketdyne by defence technology developer L3Harris.
During a 27 July quarterly earnings call, Christopher Kubasik, chief executive of L3Harris, said the US Federal Trade Commission (FTC) has decided to approve the takeover,
The FTC declines to comment about the claim by L3Harris, adding that it does not do so during investigations or if it does not intend to take enforcement action.
“We were advised today that the FTC will not block our acquisition of Aerojet Rocketdyne. Therefore, we are moving forward to close the transaction on or about July 28,” Kubasik says.
The $4.7 billion deal will be financed with existing cash and cash raised by issuing new debt.
L3Harris announced its intention to acquire Aerojet last December. The move came after defence giant Lockheed Martin abandoned its earlier bid to purchase Aerojet amid antitrust opposition from the FTC.
“If the deal is allowed to proceed, Lockheed will use its control of Aerojet to harm rival defence contractors and further consolidate multiple markets critical to national security and defence,” the FTC said in a January 2022 court filing.
The agency said the action was the USA’s first litigated challenge to a defence industry merger in decades. Lockheed had offered to buy Aerojet for $4.4 billion.
Aerojet is the USA’s last independent producer of missile propulsion systems, according to the FTC. Its products are used by a range of aircraft and munitions manufacturers, including Boeing, Raytheon, Lockheed, Kratos and Northrop Grumman.
The company produces the RS-25 engine that powered NASA’s Rockwell Space Shuttle and propels the Boeing Space Launch System – the launch vehicle set to return humans to the moon under NASA’s Artemis programme. In June, Aerojet and NASA announced the successful completion of certification testing for the latest RS-25 variant that will power the Artemis V mission with improved performance, lower cost and a simplified design.
Aerojet rocket motors also power strategically important munitions, such as Lockheed-Raytheon’s Javelin anti-tank missiles and Raytheon’s Stinger anti-aircraft missiles.
The engine manufacturer is also a critical supplier in the Pentagon’s effort to advance hypersonic flight. Aerojet components power at least two developmental hypersonic missile programmes being overseen by the US Defense Advanced Research Projects Agency: the Hypersonic Air-breathing Weapon Concept and the Operational Fires missile.
Despite strong and growing demand for its products, Aerojet has struggled in recent years. The company has failed to meet production agreements, drawing criticism from the prime contractors it supplies, including Raytheon.
The acquisition by L3Harris is seen by the industry as a lifeline for the critical supplier.
Assistance has also come from the US government. In April, the Pentagon said it was providing Aerojet with $215 million to expand production and secure the supply chain for rocket motors critical to the US military.
“This critical investment will modernise rocket propellant and motor production in the United States,” said deputy secretary of defence Kathleen Hicks.
Aerojet blamed its production issues on supply chain disruptions and cost inflation following the Covid-19 pandemic.