Lockheed Martin (LMT) announced it would buy Aerojet Rocketdyne (AJRD) in an estimated $4.4 billion deal Sunday, in an effort to boost its hypersonic weapons and space capabilities. Lockheed stock fell Monday.
Under the terms of the deal, Lockheed will pay $56 per share in cash for Aerojet Rocketdyne shares, a 33% premium on Aerojet’s closing price Friday. But the price will fall to $51 per share after Lockheed pays a special-dividend before closing.
The deal is expected to close in the second half of 2021, subject to regulatory approvals.
Earlier this month, the Air Force announced its research lab and Aerojet Rocketdyne recorded the highest thrust produced by an air-breathing scramjet hypersonic engine in a November test.
Lockheed said Aerojet supplies technology to its aeronautics, missile and space units. Aerojet engines are also used in rockets from United Launch Alliance, which is a Boeing (BA)-Lockheed joint venture.
And Aerojet is providing engines for NASA’s massive Space Launch System rocket that Boeing is building. Aerojet is a subcontractor on Northrop Grumman’s (NOC) Air Force deal to develop new intercontinental nuclear missiles worth $85 billion-$100 billion.
“This transaction enhances Lockheed Martin’s support of critical U.S. and allied security missions and retains national leadership in space and hypersonic technology,” CEO James Taiclet said in a release.
Lockheed has emerged as a leading developer of hypersonic weapons for the Air Force and the Pentagon’s secretive Darpa research arm. It is working on the Hypersonic Air-Breathing Weapon Concept and the Tactical Boost Glide weapon. Lockheed also won a $347 million contract in August to help the Army build new long-range hypersonic weapons.
Meanwhile, Lockheed’s integration with Aerojet could lower costs in an increasingly competitive space market. With space a top growth area for Lockheed in 2021, CFO Ken Possenriede said in October that Elon Musk’s SpaceX is “more than an emerging threat right now.”
The Pentagon awarded contracts to SpaceX and ULA earlier this year to provide launch services for national security payloads.
The Aerojet deal follows the completion in April of the United Technologies-Raytheon merger as well as Northrop Grumman’s takeover of Orbital ATK in 2018.
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