Lockheed-Aerojet Deal Clears Another Hurdle

Aerojet Rocketdyne shareholders approved the company’s pending sale to Lockheed Martin on Tuesday, bringing the $4.4 billion deal another step closer to completion. 

While U.S. regulators continue to review the deal, Lockheed Martin says the planned acquisition of Aerojet will save the federal government $100 million annually by joining the makers of missiles and rocket motors into one company.

“The reduction of fee-on-fee costs will drive direct cost savings for the U.S. government and American Tax Payer,” said Lockheed, in a promotional white paper. 

In February, the Federal Trade Commission extended its review of the deal, which opponents argue would permit a monopoly. The two companies expect to finalize the deal in the second half of this year. Meanwhile the Biden administration will reportedly nominate antitrust scholar Lina Khan as a member of the FTC. The nomination of Khan, a progressive-backed big tech critic, could signal a more aggressive government stance toward corporate consolidation, according to Bloomberg.

Raytheon, Lockheed’s top competitor in the missiles business, says the acquisition will eliminate the last independent American maker of solid rocket motors. The company argues the sale would give Lockheed a monopoly in military hypersonic weapons and missile defense markets.

“It...gives us pause as we think about the competitive landscape going forward,” Raytheon CEO Greg Hayes said last month during a virtual investors conference.

Raytheon executives cite another recent controversial merger as reason for caution. Northrop Grumman’s 2018 acquisition of Orbital ATK was so ground-shifting that rival Boeing claims it prevented them from bidding for an $85 billion deal to build new Air Force intercontinental ballistic missiles.

Lockheed, in the white paper, said its acquisition “ensures Aerojet Rocketdyne will continue to serve as [a] merchant supplier, providing outstanding and innovative propulsion products for the entire industry.” 

It also says it would continue to supply its competitors with rocket engines with “non-discriminatory pricing and access to propulsion technologies.” 

Backers of the sale say that Lockheed’s deep pockets will help Aerojet Rocketdyne better compete against Northrop’s solid rocket motor business. Lockheed could invest more of its own money on improving Aerojet’s existing products and developing new ones. 

Lockheed said the acquisition would allow “faster development of new capabilities and advanced technology available through merchant supply to all customers.”