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FTC Opposition Scuttles $4.4B Lockheed Purchase of Aerojet

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A Federal Trade Commission lawsuit doomed a $4.4 billion union of two defense contractors with thousands of employees and years of major operations in East Camden: Lockheed Martin Corp. and Aerojet Rocketdyne.

Lockheed Martin announced Sunday that it was scrapping plans to buy Aerojet, one of its suppliers, after federal antitrust regulators sued last month to block the deal.

Competitors and the FTC argued that the acquisition would hobble competition and possibly leave the United States with a lack of manufacturing options in a defense emergency. The FTC also said the deal would have triggered price spikes in missile components.

Lockheed Martin of Bethesda, Maryland, is by sales the largest defense company in the world. It announced its plans to buy Aerojet Rocketdyne, based in El Segundo, California, in December 2020. In its announcement Sunday, Lockheed said it scrapped its purchase plans “in the wider interest of shareholders.”

“Our planned acquisition of Aerojet Rocketdyne would have benefited the entire industry through greater efficiency, speed, and significant cost reductions for the U.S. government,” said a statement from James Taiclet, Lockheed Martin’s chairman, president and CEO.

“However, we determined that in light of the FTC’s actions, terminating the transaction is in the best interest of our stakeholders,” Taiclet added. “Moving forward, we will maintain our focus on the most effective use of capital with the highest return on investment, including our ongoing commitment to return value to shareholders.”

For its part, Aerojet Rocketdyne Holdings Inc. said in a company statement Monday that it has a strong foundation for substantial value and remains open to merger ideas. “We are poised to deliver substantial value to our shareholders driven by our continued leadership in key space exploration and defense growth markets, including by advancing hypersonics and strategic, tactical and missile defense systems,” the statement said, noting shareholder returns of 166% over the five years before the transaction plans were announced, figures that outperformed the Aerospace and Defense Index by 33% and the S&P 500 by 62%.

“We are confident in our future performance with an impressive backlog that is more than three times the size of our annual sales and a strong macroeconomic environment underpinning our portfolio.” The company’s full-year earnings report is due for release Thursday.

The FTC has described Aerojet Rocketdyne as the last independent U.S. supplier of some key missile parts, and held that the acquisition would let Lockheed cut off supply to a rival.

The two companies have about 1,000 employees each at their manufacturing and auxiliary facilities 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.

“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,” James Lee Silliman, executive director of the Ouachita Partnership for Economic Development, told Arkansas Business in assessing the acquisition plan last year.

Lockheed Martin has a total workforce of 110,000; Aerojet’s is about 5,000.

Both companies had been fully aboard on the merger. It was ratified unanimously by both company boards and affirmed by 99.7% of Aerojet shareholders in a special vote March 9, 2021.

Terms had called for Lockheed Martin to pay $56 per share in cash, about a 33% premium at the time the deal was announced.

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