{"id":58395,"date":"2020-12-21T18:35:30","date_gmt":"2020-12-21T10:35:30","guid":{"rendered":"https:\/\/wp-productionenv-bjg9h2g2bgg5b8aa.southeastasia-01.azurewebsites.net\/news\/lockheed-martin-touts-integrated-product-benefits-on-aerojet-rocketdyne-deal\/"},"modified":"2020-12-21T18:35:30","modified_gmt":"2020-12-21T10:35:30","slug":"lockheed-martin-touts-integrated-product-benefits-on-aerojet-rocketdyne-deal","status":"publish","type":"post","link":"https:\/\/starpath.global\/news\/lockheed-martin-touts-integrated-product-benefits-on-aerojet-rocketdyne-deal\/","title":{"rendered":"Lockheed Martin Touts Integrated Product Benefits on Aerojet Rocketdyne Deal"},"content":{"rendered":"<\/p>\n
\"Aerojet
Aerojet Rocketdyne\u2019s hot-fire test of an additively manufactured thrust chamber assembly at its West Palm Beach, Florida facility in 2017. Photo: Aerojet Rocketdyne.<\/figcaption><\/figure>\n<\/p>\n

Lockheed Martin<\/strong>\u2019s surprise announcement Sunday that it has agreed to acquire propulsion systems developer and manufacturer Aerojet Rocketdyne<\/strong> in a $4.4 billion deal, will lead to better integrated end products and improved manufacturing, James Taiclet, the company\u2019s president and CEO said on Monday.<\/p>\n

Aerojet Rocketdyne is a supplier of rocket and tactical motors to Lockheed Martin and other aerospace and defense customers for launch vehicles, tactical missiles, missile defense systems and emerging hypersonic weapons. About 35% of the company\u2019s current sales are from Lockheed Martin.<\/p>\n

Taiclet said Lockheed Martin will preserve Aerojet Rocketdyne\u2019s merchant supplier status to other companies in the industry just as Northrop Grumman <\/strong>was required to do when it acquired the former Orbital ATK, which competes with Aerojet Rocketdyne in the market for rocket launch vehicles and tactical propulsion systems.<\/p>\n

But, the vertical integration with a key supplier will be a win for Lockheed Martin and federal customers, in particular the U.S. Defense Department<\/strong> and NASA<\/strong>, Taiclet said. Customers need more capability amid a coming period of flattening budgets, \u201cand what that\u2019s let us to believe is that we need at Lockheed Martin to enrich our platforms with more mission systems content to enable our customers to successfully navigate that feature,\u201d he said during a conference call with analysts to discuss the pending transaction.<\/p>\n

Since taking the helm at Lockheed Martin in June, Taiclet has emphasized the need for greater innovation in the defense industry and at his company to take advantage or rapidly evolving commercial technologies and operationalize them quickly for military customers. The deal for Aerojet Rocketdyne, which is expected to close in the second half of 2021, is also in line with his vision for a 21st<\/sup> Century warfare strategy, which \u201cincludes enabling growth areas such as hypersonics, tactical missiles, integrated air and missile defense, and space systems,\u201d Taiclet said.<\/p>\n

Aerojet Rocketdyne, which had $2 billion in sales in 2019 and has nearly 5,000 employees, supplies rocket engines and propulsion systems for a large number of important and major programs including NASA\u2019s Space Launch System and Orion spacecraft, the Atlas V and Delta IV launch vehicles, the Army Tactical Missile System, Javelin anti-tank weapon, Standard Missile, the Medium Range Ballistic Missile target, the Terminal High Altitude Area Defense system, Patriot Advanced Capability-3, Guided Missile Launch Rocket System, Ground-based Missile Defense, the Hypersonic Conventional Strike Weapon, and more.<\/p>\n

The company is also a key teammate of Northrop Grumman on the Air Force\u2019s new ICBM program, the multibillion-dollar Ground-Based Strategic Deterrent, supplying propulsion systems for the upper stage of the ballistic missile.<\/p>\n

Bringing a key supplier of propulsion systems in house will allow a better marriage with Lockheed Martin\u2019s missile and rocket products, leading to better upfront designs, benefiting customers \u201cfrom an efficiency perspective, tighter engineering integration, better production planning, etcetera,\u201d Taiclet said. There will also be revenue synergies ahead because systems will be more affordable, better integrated and in the customers\u2019 hands sooner, he said.<\/p>\n

End customers will also benefit from not having to absorb the fees that Lockheed Martin typically is charged by Aerojet Rocketdyne when it supplies its propulsion products, he said. Those fees will go away, Taiclet said.<\/p>\n

Ken Possenriede, Lockheed Martin\u2019s chief financial officer, said the company estimates about $100 million in annual pre-tax cost savings synergies as a result of the acquisition. About one-third of this savings will be returned to customers through cost-reimbursable type contracts, he said.<\/p>\n

The deal must still be approved by federal regulators and Aerojet Rocketdyne\u2019s board of directors. Taiclet said that because Aerojet Rocketdyne\u2019s products don\u2019t overlap with Lockheed Martin\u2019s, he doesn\u2019t expect regulatory challenges that would ultimately derail the closing.<\/p>\n

Asked why the companies didn\u2019t wait to finalize the deal until after the incoming Biden administration comes to power in January to understand what new leadership at the Defense Department thinks, Taiclet replied that timing is driven by the availability of assets, the rationale for acquiring them, and then agreeing to price and terms.<\/p>\n

As for regulatory reviews, Taiclet said industry can\u2019t control that. He said that given the government\u2019s previous blessing of Northrop Grumman\u2019s purchase of Orbital ATK \u2014 which like Lockheed Martin\u2019s proposed deal brought in house a supplier of rocket engines and tactical propulsion systems \u2014 requiring Orbital ATK\u2019s rockets and motors business to continue as a merchant supplier industry, a similar arrangement might be expected for Lockheed Martin and Aerojet Rocketdyne.<\/p>\n

Byron Callan, an aerospace and defense analyst with Capital Alpha Partners<\/strong>, said in a client note on Monday that the proposed acquisition will \u201cthe first test of the Biden administration and its views on defense sector consolidation and structure.\u201d He has \u201cmoderate confidence\u201d that the transaction will go through.<\/p>\n

If the deal collapses, Lockheed Martin has agreed to pay Aerojet Rocketdyne a $150 million termination fee.<\/p>\n

Lockheed Martin said its sound balance sheet will allow it to continue investing in the company, repurchasing shares and paying dividends.<\/p>\n

This story was originally published by our sister publication Defense Daily.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Aerojet Rocketdyne\u2019s hot-fire test of an additively manufactured thrust chamber assembly at its West Palm Beach, Florida facility in 2017. Photo: Aerojet Rocketdyne. Lockheed Martin\u2019s surprise announcement Sunday that it has agreed to acquire propulsion systems developer and manufacturer Aerojet Rocketdyne in a $4.4 billion deal, will lead to better integrated end products and improved […]<\/p>\n","protected":false},"author":1,"featured_media":55590,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[2],"tags":[],"class_list":["post-58395","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"acf":[],"_links":{"self":[{"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/posts\/58395"}],"collection":[{"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/comments?post=58395"}],"version-history":[{"count":0,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/posts\/58395\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/media\/55590"}],"wp:attachment":[{"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/media?parent=58395"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/categories?post=58395"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/tags?post=58395"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}