Lockheed-Aerojet merger on life support, anticipating FTC lawsuit

F.P. Report

WASHINGTON: Lockheed Martin has paused its proposed $4.4 billion acquisition of Aerojet Rocketdyne after learning that the Federal Trade Commission is likely to block the transaction, the companies announced today.

The Federal Trade Commission has advised the companies that “its concerns regarding the transaction cannot be addressed adequately by the terms of the proposed consent order,” Lockheed and Aerojet stated. The companies believe it is “highly likely that the FTC will vote to sue to block the transaction” by Jan. 27.

If the FTC does decide to sue in order to block the merger, it will put Lockheed in a position where the company has to choose between defending the lawsuit or allowing the deal to fail.

Regulators, some lawmakers and defense industry executives such as Raytheon CEO Greg Hayes have raised alarms about the proposed deal, arguing that Lockheed — the nation’s largest defense prime — should not be permitted to absorb the nation’s only remaining independent supplier of solid-fuel rocket motors.

Meanwhile, others on Capitol Hill have come out in support of the deal. In an August letter to Deputy Defense Secretary Kathleen Hicks, 13 lawmakers contended that Northrop Grumman’s 2018 acquisition of competing solid-fuel rocket motor supplier Orbital ATK had disadvantaged Aerojet, which needs to merge with a larger company in order to secure its future.

Lockheed has maintained it would be a fair “merchant-supplier” of rocket motors, even while competing against other defense firms for programs requiring Aerojet products. The company had proposed a number of “merchant supply and firewall commitments,” according to the statements by Aerojet and Lockheed.

Lockheed executives — who see the deal as critical for growing the company’s space and hypersonic business — have remained hopeful that the acquisition would ultimately be completed despite minor delays. Lockheed CEO James Taiclet indicated in October that an agreement would be finalized within first quarter of 2022.