Aerojet Rocketdyne is to be purchased by US aerospace and defence contractor L3Harris Technologies in a $4.7 billion agreement.

Aerojet Rocketdyne, the final domestic independent manufacturer of missile propulsion systems, is to be purchased by US aerospace and defence contractor L3Harris Technologies in a $4.7 billion agreement.

The purchase comes after federal officials filed a lawsuit in January to stop Lockheed Martin's attempt to pay $4.4 billion for the rocket manufacturer, the world's largest defence contractor by revenue. Lockheed Martin then abandoned the proposal.

At the time, the Federal Trade Commission claimed that Lockheed would eventually dominate numerous defence programmes essential to ensuring the safety of the country by using its ownership of Aerojet to harm other defence companies.

According to the terms of the agreement reached over the weekend, L3Harris would purchase Aerojet stock for $58 per share in an all-cash deal that values Aerojet at $4.7 billion, net debt included. The unfulfilled Lockheed agreement had been reached at a share price of $56 in December 2020.

Christopher Kubasik, chief executive of L3Harris, said, "We've heard the DoD leadership loud and clear: they want high-quality, innovative, and cost-effective solutions to meet both current and emerging threats, and they're relying upon a strong, competitive industrial base to deliver those solutions. The transaction will be funded by L3Harris using current cash and fresh debt; US regulatory permission is required for it to go through.

Senior vice-president for strategy and growth at L3 Harris, Sean Stackley, downplayed potential regulatory issues with the deal. According to him, the FTC was worried about how the proposed acquisition of Lockheed would affect "competition and also on innovation." He made this statement in an interview with the Financial Times.

According to Stackley, L3 Harris aimed to "strengthen Aerojet's role as a merchant supplier in defence and space."

He continued, "I think we are getting a warm welcome," referencing the company's conversations with Aerojet customers.

According to Refinitv data, L3Harris, which is well-known for its communications and electronic technology used in weapons systems such as sensors and for its participation in space programmes, is the sixth-largest US defence contractor with an annual revenue of $17.8 billion. It is in charge of creating the position and navigation unit for the truck-mounted rocket launcher known as Himars, or high mobility artillery rocket system, which has been essential for the Ukrainian army in its conflict with Russia.

The three leading tactical missile manufacturers for the Department of Defense, Lockheed, Raytheon, and Boeing, depend on Aerojet and a Northrop Grumman affiliate for essential parts like rocket motors.

L3Harris will become a more significant subcontractor for these three bigger businesses as well as the Pentagon as a result of its acquisition. Last year, Aerojet completed $2.2 billion in sales.

(Sources: financialtimes.com, reuters.com, investing.com)