Lockheed to boost space expansion with $4.4 billion Aerojet deal – The Dallas Morning News

Lockheed Martin Corp. is expanding its foray into futuristic space travel and missile defense by acquiring supplier Aerojet Rocketdyne Holdings Inc. in a deal valued at $4.4 billion, targeting higher sales and more savings in an environment of tightening defense budgets.

Aerojet is a supplier to Lockheed, including its Lockheed Martins Grand Prairie-based Missiles and Fire Control division and its F-35 assembly facility in Fort Worth.

As part of the transaction, Aerojet declared a $5 per share special dividend to be paid on March 24 to holders of record as of March 10. The payment of that special dividend will adjust the $56 per share consideration to be paid by Lockheed Martin, according to a statement Sunday.

At $51, Lockheed will be buying Aerojet at a 21% premium from the closing price on Friday. Lockheed chief executive officer Jim Taiclet stepped into the top job this year with a reputation as a dealmaker and a stockpile of cash. With Aerojet, he is picking up a key U.S. supplier of propulsion systems for missiles, rockets and other space and defense applications.

Still, the consolidation is likely to face scrutiny from key customers such as the U.S. Defense Department and the National Aeronautics and Space Administration. Another question mark is the reaction of competitors such as Boeing Co. and Raytheon Technologies Corp. that rely on Aerojets motors for their own hypersonics and missile products.

Its not clear how defense and antitrust officials will view this deal, especially in a new administration, but we could imagine pushback from others in industry, such as Raytheon or Boeing, Seth Seifman, an analyst at JPMorgan Chase & Co., said in a note to customers.

Aerojet soared almost 24% to $52.10 in afternoon trading in New York after surging as much as 26%, the most intraday since 2009. Lockheed fell almost 6% to $349.99. Aerojet has declined 7.9% this year through Dec. 18 while Lockheed dropped 8.6%. A Standard & Poors index of U.S. aerospace and defense companies tumbled 18% over the same period.

Lockheed has been scouting for acquisitions. In January, the company said it was flush with cash and open to deals as Raytheon Co. prepared to combine with United Technologies Corp. to create a powerhouse in aerospace and defense.

During Lockheeds October earnings call, Taiclet said the company would be active but very, very prudent in its drive to bring in the technologies faster into the company that we think are going to be crucial for the future.

The Aerojet transaction is expected to close in the second half of 2021 after getting regulatory approvals and a nod from Aerojets shareholders.

Lockheeds space division is its third-largest business, contributing 18% of its 2019 revenue. The company competes with Elon Musks Space Exploration Technologies Corp. for U.S. government rocket launches through the United Launch Alliance, its joint venture with Boeing.

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Lockheed to boost space expansion with $4.4 billion Aerojet deal - The Dallas Morning News