Acquisition Agreement for Aerojet Rocketdyne Terminated by Lockheed Martin
An acquisition agreement for Aerojet Rocketdyne has been terminated by Lockheed Martin after the U.S. Federal Trade Commission (FTC) filed a preliminary injunction late last month to block the move.
"Moving forward, we will maintain our focus on the most effective use of capital with the highest return on investment, including our ongoing commitment to return value to shareholders. We remain confident in our company's strong foundation and growth potential as several exciting projects enter production.
Lockheed Martin Chairman, President and CEO James Taiclet.
The suit was filed January 25th. In a news release, the FTC said that the U.S. Department of Defense (DoD) reviewed the acquisition and considered the potential impacts of the transaction on national security, the nation’s industrial and technological base, competition, and innovation. As part of this assessment, the DoD facilitated a series of FTC-led interviews with DoD-impacted stakeholders. DoD’s assessment was provided to the FTC for its deliberations and final decision-making.
According to the FTC, Lockheed’s proposed acquisition agreement for Aerojet would have given Lockheed control over critical propulsion inputs that its rivals require to compete against Lockheed. Specifically, the complaint alleged that the proposed acquisition would give Lockheed the ability and incentive to deny, limit, or otherwise disadvantage competitors’ access to critical propulsion inputs for various weapons systems. The combined firm could disadvantage rivals by affecting the price or quality of the product, the quality of the engineering support, and the schedule and contract terms for developing and supplying it or otherwise disadvantage its rivals. As a subcontractor, Aerojet also has had access to prime contractors’ sensitive information about technological advancements, cost, schedule, and business strategies. The complaint alleges that post-acquisition, Lockheed would have an incentive to exploit its access to its rivals’ proprietary information to gain an advantage in competitions against them.
"Our planned acquisition of Aerojet Rocketdyne would have benefitted the entire industry through greater efficiency, speed, and significant cost reductions for the U.S. government," said Lockheed Martin Chairman, President and CEO James Taiclet. "However, we determined that in light of the FTC's actions, terminating the transaction is in the best interest of our stakeholders. We stand by our long heritage as a merchant supplier and trusted partner and will continue to support Aerojet Rocketdyne and other essential suppliers in the Defense Industrial Base still overcoming the challenges of the pandemic.
"Moving forward, we will maintain our focus on the most effective use of capital with the highest return on investment, including our ongoing commitment to return value to shareholders. We remain confident in our company's strong foundation and growth potential as several exciting projects enter production.
"Finally, I'm proud of the 114,000 patriotic men and women of Lockheed Martin. They have a principled commitment to deliver the highest quality and most effective solutions to our customers. We will continue to support the United States and its allies through our industry leadership and developing the technologies to ensure effective threat deterrence for decades to come."
"We are poised to deliver substantial value to our shareholders driven by our continued leadership in key space exploration and defense growth markets, including by advancing hypersonics and strategic, tactical and missile defense systems," Aerojet Rocketdyne said in a statement posted to its website. "Aerojet Rocketdyne has delivered strong shareholder returns of 166% over the five years prior to the transaction announcement, significantly outperforming the Aerospace and Defense Index by 33% and the S&P 500 by 62%.
"We are confident in our future performance with an impressive backlog that is more than three times the size of our annual sales and a strong macroeconomic environment underpinning our portfolio. We look forward to providing further details regarding our financial performance and strategy on our fourth quarter and full year 2021 earnings report on Feb. 17, 2022."
(Updated 2/15/22 9:30 am EST adding statement from Aerojet Rocketdyne)
(Source: LMC, Aerojet Rocketdyne and FTC news releases)