On February 13, Lockheed Martin made an announcement stating that it has chosen to cancel its $4.4 billion agreement to acquire Aerojet Rocketdyne, a manufacturer of rocket engines.
This decision was made less than three weeks after the Federal Trade Commission (FTC) filed a lawsuit aiming to prevent the acquisition. In December 2020, Lockheed Martin had initially expressed its intention to purchase Aerojet Rocketdyne, which happens to be the final independent supplier of missile propulsion systems in the United States.
The FTC, voting unanimously at 4-0 last month, sought an injunction to block the transaction on the basis of antitrust concerns. Their argument was that if the deal went through, Lockheed would gain the ability to monopolize critical components necessary for the construction of competing missiles, potentially harming other defense contractors.
Aerojet Rocketdyne is responsible for supplying power, propulsion, and armament systems utilized in missiles produced by Lockheed Martin and other major defense contractors.
Lockheed Martin’s President and CEO, James Taiclet, explained in a statement that they arrived at the decision to terminate the transaction due to the actions taken by the FTC. He maintained that the acquisition would have ultimately benefited the industry as a whole by increasing efficiency, speed, and significantly reducing costs for the U.S. government.
In their complaint filed on January 25, the FTC argued that without competition, Lockheed would have the ability to increase prices for the U.S. government while delivering lower quality and less innovation. They expressed concerns about further consolidation in markets critical to national security and defense.
Following the FTC’s announcement, analysts had predicted that Lockheed Martin would abandon the merger agreement instead of challenging the U.S. government in court.
Aerojet Rocketdyne, on February 13, released a statement affirming their commitment to operate as an independent company. They expressed confidence in their ability to deliver substantial value to shareholders by maintaining leadership in key areas such as space exploration and defense growth markets. They specifically mentioned advancements in hypersonics and strategic, tactical, and missile defense systems. Aerojet Rocketdyne plans to disclose financial performance details and strategy in its fourth-quarter earnings report on February 17.