Lockheed Martin to acquire Aerojet Rocketdyne in $4.4bn deal

1 December 2020 By GlobalData

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Lockheed Martin CEO James Taiclet. Image: Lockeed Martin

Lockheed Martin has signed a definitive agreement to acquire Aerojet Rocketdyne Holdings in a deal valued at $4.4bn.

California-based Aerojet Rocketdyne focuses on manufacturing aerospace and defence rocket engines. The company has 15 primary operations sites across the US. Last year, Aerojet Rocketdyne posted annual revenue of nearly $2bn.

Lockheed Martin will pay $56 per share in cash to acquire Aerojet Rocketdyne. The share price is expected to drop to $51 per share after the payment of a pre-closing special dividend.

The acquisition is expected to bolster Lockheed Martin’s expertise in propulsion technology. The company already uses Aerojet Rocketdyne’s propulsion systems across its Aeronautics, Missiles and Fire Control and Space business areas.

Lockheed Martin president and CEO James Taiclet said: “Acquiring Aerojet Rocketdyne will preserve and strengthen an essential component of the domestic defence industrial base and reduce costs for our customers and the American taxpayer.

“This transaction enhances Lockheed Martin’s support of critical US and allied security missions and retains national leadership in space and hypersonic technology. We look forward to welcoming their talented team and expanding Lockheed Martin’s position as the leading provider of 21st-century warfare solutions.”

In a separate statement, Aerojet Rocketdyne president and CEO Eileen P. Drake said: “Joining Lockheed Martin is a testament to the world-class organisation and team we’ve built and represents a natural next phase of our evolution.

“As part of Lockheed Martin, we will bring our advanced technologies together with their substantial expertise and resources to accelerate our shared purpose: enabling the defence of our nation and space exploration.”

The acquisition is expected to close in the second half of next year, subject to regulatory and shareholders’ approvals as well as other customary closing conditions.

Controversy remains over the deal

When the State Department gave Congress informal notice of the potential deal last month, Chairman of the House Committee on Foreign Affairs Representative Eliot L. Engel said that the sale “would significantly change the military balance in the Gulf and affect Israel’s military edge” adding that rushing approval of the deal was “not in anyone’s interest”.

Engel added: “My consideration of this sale will include several factors. First, we must maintain Israel’s qualitative military edge, as provided in US law, and ensure Israel’s military superiority in the region, as Israel remains our most crucial ally there. Israel currently has exclusive access in the region to the F-35, which has guaranteed its military edge over the last several years. As Congress reviews this sale, it must be clear that changes to the status quo will not put Israel’s military advantage at risk.”

The lawmaker said that increased activity from Russia and China in the Middle East meant that Congress would need ‘unimpeachable assurances’ that the fighter’s advanced technologies would be safeguarded. He added that a sale to the UAE would ‘inevitably’ generate demand for the jet from other neighbouring countries. In October, Qatar made a formal request to purchase the F-35.

Senate Foreign Relations Committee Ranking Member Senator Bob Menendez said: “As feared, the details of this proposed sale suggest President Trump is seeking to rush through an increase of complex weapons systems into a volatile region seemingly without serious consideration of US interests or the legal parameters of Israel’s qualitative military edge.

“Claiming Israel will maintain its edge while offering Abu Dhabi the same number of these sophisticated stealth warplanes as Israel simply does not add up. Recklessly accelerating the timeline around a reportedly artificial deadline precludes sufficient consideration of these issues by the national security professionals in the Departments of State and Defense.”

Menendez added: “Congress has statutory authority over foreign arms sales and our responsibilities will not be relinquished. The American public has a right to insist that the sales of US weapons to foreign governments – especially those of this magnitude and lethality – are consistent with US values, our national security objectives, and the safety of our closest allies.

“The Trump administration’s refusal to answer our questions about how the national security interests of both the US and Israel will be served, or undermined, by such a sale is a sure-fire way not to get Congressional support to move forward with this sale.”
Will President-elect Biden change course?

After the potential F-35 sale became public in October, Anthony Blinken, a Foreign Policy Advisor to Biden and former Obama-era official, was reported by the Jerusalem Post as saying that he had ‘concerns’ about what commitments the US Government may have made to the UAE.

Since then, US President Donald Trump lost his re-election bid, with President-elect Joe Biden set to take office in January. Democrat Senator Chris Murphy said that the Trump administration approving the sale after losing the election was “completely inappropriate”, adding: “It's a transparent attempt to narrow options in the Middle East for President-elect Biden when he takes office.”