Lockheed to Boost Space Expansion With $4.4 Billion Aerojet Deal

(Bloomberg) - Lockheed Martin Corp. expands its foray into futuristic aerospace and missile defense with the acquisition of $ 4.4 billion in supplier Aerojet Rocketdyne Holdings Inc. for increased revenue and savings in a tight defense budget.
As part of the transaction, Aerojet declared a special dividend of $ 5 per share payable to registered holders on March 24th starting March 10th. The payment of this special dividend will adjust the consideration payable by Lockheed Martin of $ 56 per share, according to a statement on Sunday.
At $ 51, Lockheed will buy Aerojet at a premium of 21% over Friday's closing price. Jim Taiclet, Lockheed's chief executive officer, stepped into the top job earlier this year with a reputation as a dealmaker and a stash of cash. With Aerojet, he is picking up a major US supplier of propulsion systems for rockets, rockets and other space and defense applications.
Still, the consolidation is likely to be under scrutiny by key customers like the US Department of Defense and the National Aeronautics and Space Administration. Another question mark is the reaction of competitors like Boeing Co. and Raytheon Technologies Corp., who rely on Aerojet engines for their own hypersonic and missile products.
Possible "pushback"
It's not clear how defense and antitrust officials "will see this deal, especially in a new administration, but we could envision a backlash from others in the industry like Raytheon or Boeing," said Seth Seifman, an analyst at JPMorgan Chase & Co . in a note to customers.
Aerojet rose 22% to $ 51.11 at 9:55 a.m. in New York after rising 26%, its highest day since 2009. Lockheed fell 2% to $ 348.79, unifying the world's largest defense company Bringing a market value of nearly $ 98 billion. Aerojet was down 7.9% that year through December 18, while Lockheed was down 8.6%. A Standard & Poor's index of US aerospace and defense companies fell 18% over the same period.
Lockheed was looking for acquisitions. In January, the company announced it was cashless and open for business as Raytheon Co. prepared to partner with United Technologies Corp. create an aerospace and defense powerhouse.
What Bloomberg Intelligence Says
"Lockheed's proposed $ 4.4 billion acquisition of Aerojet Rocketdyne would add a major provider of propulsion systems for hypersonic, space systems and franchise missile programs in all major defense sectors. We believe this could help drive growth beyond to maintain the flattened US defense budget. "
- Douglas Rothacker, aerospace analyst
- Click here to read the research
Speaking during Lockheed's October earnings call, Taiclet said the company was active but "very, very careful" in its drive to "bring technologies to the business faster that we believe will be critical to the future."
The Aerojet transaction is expected to close in the second half of 2021 after Aerojet shareholders receive regulatory approvals and a nod.
Late last week, Aerojet's stock was trading at 25 times expected earnings, compared to 16 times for Lockheed.
Lockheed's aerospace division is the third largest company, contributing 18% of 2019 sales. The company competes with Elon Musks Space Exploration Technologies Corp. the US government's rocket launches through the United Launch Alliance, their joint venture with Boeing.
Lockheed was advised by Goldman Sachs, Ardea Partners and Hogan Lovells, while Citigroup and Evercore and Jenner & Block and Gibson, Dunn & Crutcher represented Aerojet.
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