Lockheed cancels $4.4 billion deal to buy Aerojet amid regulatory hurdles

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Feb 13 (Reuters) – U.S. arms maker Lockheed Martin Corp (LMT.N) on Sunday canceled plans to acquire rocket engine maker Aerojet Rocketdyne Holdings Inc (AJRD.N) for $4.4 billion in the face of opposition from US antitrust authorities.

The Federal Trade Commission sued for blocking the deal in late January on the grounds that it would allow Lockheed to use its control of Aerojet to harm other defense contractors. Missile maker Raytheon Technologies (RTX.N) was an outspoken opponent of the proposed acquisition.

The merger, which was announcement in late 2020, drew criticism because it would give Lockheed a dominant position in solid-fuel rocket motors – a vital part of the US missile industry.

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Lockheed chief executive James Taiclet said the acquisition would have improved efficiency, speed and reduced costs for the US government, but terminating the deal was in the best interests of its stakeholders.

Aerojet, which reports fourth quarter results later this week, said in a separate statement it still expects strong “future performance” despite the merger cancellation.

The companies’ merger agreement does not include a termination fee in the event antitrust regulators object to the deal, according to a regulatory filing. A Lockheed spokesperson previously said the company does not plan to make such a payment to Aerojet.

Had the deal ended up in court, it would have been the first contentious challenge to a defense merger in decades, according to the FTC.

Other critics of the deal included Democratic U.S. Senator Elizabeth Warren, WHOhad asked the FTC to examine the internal firewalls that Lockheed had put in place to prevent it from gaining a competitive advantage over its peers.

Lockheed had said it accounted for 33% of Aerojet sales and argued the deal would reduce costs for the Pentagon and the US taxpayer.

Rocket engines like those made by Aerojet are used in everything from the homeland defensive missile system to Stinger missiles.

Aerojet develops and manufactures liquid- and solid-propelled rockets, air-breathing hypersonic engines, and electric power and propulsion for space, defense, civil, and commercial applications. Its customers include the Pentagon, NASA, Boeing (BA.N), Lockheed Martin, Raytheon and United Launch Alliance.

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Reporting by Anirudh Saligrama in Bengaluru and Diane Bartz and Mike Stone in Washington, DC; Editing by Diane Craft and Jacqueline Wong

Our standards: The Thomson Reuters Trust Principles.

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