Defense contractor L3Harris plans to buy Aerojet Rocketdyne for $4.7B
Aerojet makes engines used in missiles, including the Javelin deployed in Ukraine
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Defense firm L3Harris Technologies Inc. on Sunday said it agreed to buy Aerojet Rocketdyne Holdings Inc. in a $4.7 billion deal that would cement L3Harris’s role as one of six prime defense contractors for the Pentagon.
Aerojet is a major maker of engines used in missiles, such as the Javelin deployed in Ukraine. Its products also help power National Aeronautics and Space Administration rockets and U.S. military hypersonic systems designed to deter China’s military expansion.
Aerojet was put back up for sale after federal regulators in January sued to block its planned $4.4 billion purchase by Lockheed Martin Corp. on antitrust grounds, sparking a bitter internal board battle.
President Joe Biden speaks during tour of the Lockheed Martin Pike County Operations facility where Javelin anti-tank missiles are manufactured, Tuesday, May 3, 2022, in Troy, Ala. (AP Photo/Evan Vucci / AP Newsroom)
L3Harris’s all-cash bid of $58 a share won out over competing offers from General Electric Co. and Textron Inc., according to people involved in the negotiations. A deal is expected to face intense regulatory scrutiny at a time when Aerojet has also wrestled with production problems.
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| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| LHX | L3HARRIS TECHNOLOGIES INC. | 244.27 | -1.57 | -0.64% |
| AJRD | NO DATA AVAILABLE | - | - | - |
| GE | GE AEROSPACE | 177.52 | +0.59 | +0.33% |
| TXT | TEXTRON INC. | 83.34 | -1.57 | -1.85% |
Melbourne, Fla.-based L3Harris, which has a market value of around $40 billion, is the product of a 2019 tie-up between L3 Technologies Inc. and Harris Corp. The deal created a company with a product range stretching from military radios and top secret space hardware to air-traffic control systems.
Chris Kubasik, chief executive of L3Harris, has said he aims to make his company an alternative to the largest Pentagon suppliers such as Raytheon Technologies Corp. and Lockheed Martin.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| LMT | LOCKHEED MARTIN CORP. | 530.96 | -3.87 | -0.72% |
| RTX | RTX CORP. | 119.39 | +0.86 | +0.73% |
L3Harris has sold training businesses to fund expansion and investment in other areas, and in recent months won contracts outside its usual areas of expertise, including to supply aircraft for the U.S. Special Operations Command and satellites to track hypersonic missiles.
While the F-35 is produced by rival Lockheed Martin, L3 Harris supplies mainly of the parts that go into it. (photo realistic 3d illustration)
Mr. Kubasik said in an interview that the deal represented "a second bite at the apple" for L3Harris, which had previously eyed Aerojet to add exposure to engines, and more space and hypersonics work. "We want to be the disrupter," he said.
L3Harris has also expanded with a recent deal to purchase a military-communications business from satellite specialist Vasat Inc.
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Aerojet last month said it is catching up on rocket motor work for Raytheon, which has said supplier issues are expected to disrupt its missile production through 2024. Aerojet CEO Eileen Drake said a fire at a supplier disrupted production, but Aerojet stood up a new manufacturing plant and improved hiring and its own supply chain.
Aerojet Rocketdyne delivers a broad range of capabilities to support hypersonics, including solid rocket motor boosters, scramjets, warheads and missile defense technologies. (Credit: Aerojet Rocketdyne Artist Concept) (AP Newsroom)
El Segundo, Calif.-based Aerojet’s importance to national security was highlighted when the Pentagon in February issued an update on the state of defense suppliers, highlighting consolidation in the rocket motor sector as an area of concern. The Pentagon said the shrinking number of providers could stifle innovation and price competition, and leave the military vulnerable to supply disruptions.
Aerojet also makes solid fuel rockets, which defense experts have said are preferred because of their reliability and longevity compared with liquid-fueled motors. In 1990 there were eight such manufacturers, according to the February Pentagon report. Orbital ATK Inc., the other large producer, was bought by Northrop Grumman Corp. in 2017.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| NOC | NORTHROP GRUMMAN CORP. | 488.68 | -5.31 | -1.07% |
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Antitrust enforcers at the Federal Trade Commission in January sued to block Lockheed Martin’s deal to acquire Aerojet, arguing a deal would harm rival defense contractors and lead to unacceptable consolidation in markets critical to national security. Lockheed Martin dropped its bid on Feb. 13.