Intelligence, surveillance and defense equipment leader L3Harris agreed on Sunday to buy rocket engine producer Aerojet Rocketdyne for $4.7 billion. AJRD stock rose on Monday while LHX stock sank by the closing bell.
Sacramento, Calif.-based Aerojet Rocketdyne, America's largest manufacturer of rocket propulsion systems, generates around $2.3 billion in annual revenue. The 100-year-old company has produced engine systems for the Department of Defense, NASA, and U.S. allies. Aerojet's technology helps power Stinger, Patriot, Tactical Tomahawk and Javelin missiles.
L3Harris Eyes The Missile Market
The deal shows L3Harris angling to capture a big piece of the $40 billion allotted for missiles and defense systems in the $858 billion 2023 National Defense Authorization Act, which passed the Senate on Thursday.
L3Harris says the acquisition provides access to new missile and missile defense markets, which include hypersonic rockets and space exploration. It should provide a "better balance" between long-term cycle programs and short-cycle products, L3Harris says. And the defense contractor expects the deal to increase its backlog 30%, to nearly $30 billion.
"With this acquisition, we will use the combined talents of more than 50,000 employees to drive continuous process improvement, enhance business operations and elevate the performance of this crucial national asset, " L3Harris CEO Christopher Kubasik stated in the news release.
According to terms of the agreement, L3Harris will pay $58 per share. The full amount of the all-cash transaction includes Aerojet's net debt. The companies expect the deal to close in 2023, pending regulatory approval and other customary closing conditions.
Lockheed Martin tried to purchase Aerojet for $4.4 billion in January but was blocked by federal regulators on antitrust grounds. And L3Harris beat out bids from General Electric and Textron, according to reports by the Wall Street Journal.
LHX stock dropped 3.6% on Monday following the news. AJRD stock rose 1.3% by Monday's closing bell.
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