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As Missile Companies Unite, Camden Area Is Looking UpLock Icon

5 min read
Eileen Drake
<p>Aerojet Rocketdyne CEO Eileen Drake with Gov. Asa Hutchinson in 2018, announcing an expansion at the company's facility in East Camden. </p> ()

Two top defense contractors are converging in East Camden, and company leaders and local officials are listening for the boom.

Instead of job losses that often follow mergers, new hiring and expansions appear likely as the Camden area’s two largest employers merge in Lockheed Martin’s pending $4.4 billion acquisition of Aerojet Rocketdyne.

Both companies have major manufacturing operations in East Camden, and both have been expanding and landing long-term contracts for military hardware like Lockheed’s Army Tactical Missile System (ATACMS) and Aerojet Rocketdyne’s solid rocket motors.

The deal, subject to federal approval but set to close in the second half of this year, would wed high-tech defense companies that both see the deal as good for taxpayers, shareholders and the competitive defense industry, a south-central Arkansas mainstay since World War II.

“We have other defense companies at Highland Industrial Park [in East Camden], but Lockheed and Aerojet are the two largest in investment, operations and employees,” said James Lee Silliman, executive director of the Ouachita Partnership for Economic Development.

“All of the defense industries here are staying busy, and they’re being awarded multiyear contracts, which of course make their world go round. That means that they can guarantee employment further out” into the future.

Lockheed Martin Corp. of Bethesda, Maryland, which last week reported first-quarter net earnings of $1.8 billion, has a workforce of 110,000, of which nearly 1,000 are in East Camden. The company ranked 57th on last year’s Fortune 500 list. Aerojet, of El Segundo, California, has 5,000 total employees and 971 in East Camden. The company had $138 million in net income in 2020, according to its Feb. 18 financial overview.

Lockheed Aerojet East Camden Hutchinson St. John
<p>Gov. Asa Hutchinson, left, hailed a 2019 expansion with Lockheed COO Frank St. John.</p> ( AEDC)

Growing Workforces

An Aerojet spokeswoman told Arkansas Business that her company is still looking to grow in south Arkansas.

Skilled manufacturers and engineers looking to aid America’s defense system are drawn to the company’s mission “and to the quality of life in southern Arkansas,” she said. Aerojet’s Camden workforce has increased by more than 70% in the past five years and is still growing.

“The two companies rank No. 1 and No. 2 as area employers,” Silliman said.

The acquisition, which was ratified unanimously by both company boards and affirmed by 99.7% of Aerojet shareholders in a special vote March 9, was first announced Dec. 20. It is awaiting clearance by the Federal Trade Commission.

Lockheed and Aerojet press representatives said they couldn’t say much about how the merger will affect operations in Arkansas because those details are being worked out by transition committees. But Lockheed Martin has argued that the combination will help it deliver timely and cost-effective technology “to support our customers and the defense of our nation and its allies.”

It projects an annual $100 million in savings for the U.S. government on Lockheed Martin programs, and sees $150 million a year in “cost synergies.”

Terms call for Lockheed Martin to pay $56 per share in cash, about a 33% premium to Aerojet Rocketdyne’s closing stock price on Dec. 18. As part of the deal, Aerojet paid a special $5-a-share dividend to stockholders last month; that dividend is expected to reduce Lockheed Martin’s cost to $51 a share.

“We are pleased to bring together our complementary companies in a transformative transaction that will provide premium cash value for our shareholders and tremendous benefits for our employees, customers and partners,” said a statement by Eileen P. Drake, CEO and president of Aerojet Rocketdyne.

Jim Taiclet, Lockheed Martin’s CEO, said in an end-of-year statement that the acquisition will “strengthen an essential component of the domestic defense industrial base and reduce costs for our customers and the American taxpayer.” The deal, he added, “enhances Lockheed Martin’s support of critical U.S. and allied security missions and retains national leadership in space and hypersonic technology.”

Lockheed Aerojet East Camden
Aerojet Rocketdyne in East Camden produces solid rocket motors for the PAC-3 Patriot missile systems used worldwide by the United States Army. ( Aerojet Rocketdyne)

‘Developmental Gateway’

Aerojet officials couldn’t discuss how it will become part of Lockheed Martin, saying those kinds of details are being worked out. Until the transaction closes, they’ll continue working as independent companies, though Aerojet has long been a supplier to Lockheed, which represents 33% of Aerojet sales.

Late last month, Lockheed selected Aerojet to provide propulsion for the U.S. Missile Defense Agency’s Next Generation Interceptor program, known as NGI. A key part of the nation’s missile defense system, the NGI program produces rockets to intercept and destroy incoming intercontinental ballistic missiles.

Aerojet Rocketdyne also put the finishing touches on its state-of-the-art engineering, manufacturing and development facility in East Camden in October, setting the stage for years of rocket building. The 17,000-SF facility was specifically designed as a “developmental gateway” to future Aerojet Rocketdyne large solid rocket projects, including the Ground Based Strategic Deterrent program and hypersonics. The facility provides capacity to produce more large solid rocket motors at Camden, where Aerojet makes 75,000 of the motors per year.

The spokeswoman emphasized Arkansas’ crucial place in Aerojet’s operations and history. “For more than 40 years, our talented team in Arkansas has developed and produced important defense products and capabilities that have helped protect our warfighters, our nation, and our allies,” she said.

She also praised the expansion support the company received from the Ouachita Partnership for Economic Development, the Arkansas Economic Development Commission and Calhoun County officials.

“Aerojet Rocketdyne Camden relies on local businesses for many supporting services,” the spokeswoman said. “We partner with more than 140 Arkansas businesses whose services and products we rely on to meet our mission. Since 2015, we have sourced more than $167 million to Arkansas suppliers.”

No Done Deal

Both Aerojet and Lockheed have been expanding in Camden since 2015, Silliman said. “In an expansion announced by the governor’s office in August 2018, Aerojet announced 141 new jobs and about $44 million in investment in new facilities here,” Silliman said. “And then Lockheed Martin had a major announcement in June 2019 at the Paris Air Show. The governor announced a $142 million investment in their Camden facility, new buildings and equipment, and 326 new jobs.”

Raytheon Technologies Corp. of Waltham, Massachusetts, which also has operations in Camden, is formally opposing the Lockheed-Aerojet deal. Raytheon CEO Gregory Hayes, speaking at a Miami conference in February, said Aerojet “is a huge supplier to us,” and after consolidation “you won’t have an independent supplier on the solid rocket motor side. It gives us pause.” In effect, he said, Raytheon would end up buying 70% of its missiles’ propulsion systems from its chief competitor.

Speaking after Hayes at the Barclays Industrial Select Conference on Feb. 9, Lockheed Martin Chief Financial Officer Ken Possenriede said Aerojet would “play fair” as an engine contractor as a part of Lockheed. “Aerojet Rocketdyne is going to be a more reliable supplier as part of Lockheed Martin than it would be as an independent supplier,” he said.

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