Lockheed Martin pulls out of a deal to buy Aerojet Rocketdyne

Lockheed Martin stated on February 13 that it has chosen to cancel a $4.4 billion plan to buy rocket engine maker Aerojet Rocketdyne. The ruling comes under three weeks after the FTC launched a lawsuit to stop the merger. Lockheed Martin revealed its intention to purchase Aerojet Rocketdyne, the only independent US producer of missile propulsion systems, in December 2020.

Last month, the Federal Trade Commission voted 4-0 to seek an injunction to halt the purchase on antitrust grounds, claiming that it would allow Lockheed to “shut off other defense manufacturers from the crucial components they need to develop competitive missiles.”

Lockheed Martin as well as other defense prime contractors employ Aerojet Rocketdyne’s power, propulsion, and armament systems in their missiles. “We determined that terminating the deal is in the greatest advantage of our stakeholders in light of the FTC’s actions,” Lockheed Martin President and Chief Executive Officer James Taiclet stated in a statement.

He said that the agreement “would have benefited the entire sector through increased efficiency, speed, and huge cost savings for the US government.”

“Without competitive pressure, Lockheed can raise the price the US government has to pay while offering inferior quality and less innovation,” the FTC claimed in a complaint filed on January 25. We can’t afford any further concentration in markets that are crucial to our national security and defense.”

Analysts believed Lockheed Martin will cancel the merger agreement instead of fighting the US government in court after the FTC revealed its judgment. Aerojet Rocketdyne said in a statement on February 13 that it is moving forward as a separate entity.

“Our sustained leadership in critical space exploration and military growth industries, including advanced hypersonics and strategic, tactical, and missile defense systems, positions us to generate tremendous value to our shareholders,” Aerojet stated. In its fourth-quarter results report on February 17, the firm stated it will share specifics about its financial performance and strategy.

As per analysts headed by Sheila Kahyaoglu, “the deal’s absence might speed share repurchases,” but “the deal appeared to have minimal impact on cap deployment simply because of its size and ability to finance with debt.”

Since the beginning of the year, Lockheed’s stock has risen approximately 12%, while Aerojet’s stock has lost 16%.

President Joe Biden’s push to take a tougher stance against mergers throughout the economy was put to the test with the proposed acquisition.

It was the FTC Chair Lina Khan’s second big challenge in as many months. The agency filed a lawsuit in December to prevent Nvidia Corp. from buying Arm Ltd. from SoftBank Group Corporation

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