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L3Harris Close to Acquire Aerojet Rocketdyne in $4.7 Billion Deal

L3Harris Technologies Inc is finalizing a $4.7 billion deal to buy Aerojet Rocketdyne Holdings Inc, ten months after the latter’s $4.4 billion sale to Lockheed Martin Corp fell down.

Lockheed Martin backed out of its merger with Aerojet in February after antitrust officials filed a lawsuit to stop it, claiming that allowing the El Segundo, California-based company to be taken over by its biggest client would have significantly harmed Lockheed Martin’s competitors.

Aerojet’s primary competition rather than customer is the defense contractor L3Harris. L3Harris would be able to grow its space defense systems and precision weapons businesses with the aid of Aerojet’s solid-fuel rocket motors and other propulsion technologies.

One of the sources claimed that L3Harris outbid General Electric Co with a $58 per share offer in the closing stages of the sale of Aerojet. The sources further indicated that an agreement might be declared soon.

The price of the acquisition is 28% higher than what Aerojet’s shares were trading for on October 24, the last trading day before Reuters revealed that the business was considering a sale.

After Orbital ATK Inc. was purchased by Northrop Grumman Corp. in 2018 for $9.2 billion, Aerojet, the largest manufacturer of propulsion systems in the American defense industry, remained an independent business.

The business creates and produces hypersonic engines and liquid and solid fuel rocket motors for use in space, defense, civic, and industrial applications. Pentagon, Lockheed Martin, and Raytheon Technologies Corp., Boeing are among its clients.

L3Harris was founded in 2019 as a result of the merging of L3 Technologies and Harris Corp, two companies that were trying to build up in order to become more significant Pentagon suppliers. Since then, the corporation has expanded through acquisitions, most notably agreeing to pay $1.96 billion to acquire the tactical data division of Viasat Inc.

L3 Harris was one of the bidders fighting for Aerojet; Jefferies analysts noted in a note earlier this month that Aerojet offered complementary initiatives across key growth sectors that would account for 15% of L3Harris’ sales. The Jefferies analysts stated that “overlap is more complimentary than vertical, lowering regulatory risk.”

Although authorities attempted to thwart Lockheed Martin’s acquisition of Aerojet Rocketdyne last year, experts indicated they were much more likely to approve the propulsion company’s proposed agreement with prime contractor L3Harris Technologies.

If authorized, the $4.7 billion acquisition would see L3Harris, the sixth-largest American defense company, acquire the nation’s sole independent manufacturer of solid rocket motors. The transaction is anticipated to complete in 2023, subject to regulatory approvals.

L3Harris is betting that the deal, as stated in the public terms, will be approved by regulators. L3Harris would be required to pay Aerojet a $406 million “reverse-breakup” charge if the government rejected the purchase.

According to Bialos, who is currently co-chair of the aerospace, defense, and security group at the international law firm Eversheds-Sutherland, “this will have a considerably easier time than the Lockheed-Aerojet deal.”

“We’ve heard the Defense Department 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,” said L3Harris Chairman and CEO Chris Kubasik.

According to the two corporations’ release, the agreement gives the nation a “strengthened merchant supplier.”

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