US government files case to block Lockheed Martin’s takeover of rocket engine supplier

The US government is stepping in to try to block Lockheed Martin’s proposed $4.4 billion acquisition of Sacramento, Calif.-based Aerojet Rocketdyne, which supplies missile propulsion systems.

On Tuesday, the Federal Trade Commission (FTC) announced that it had filed a lawsuit to prevent the takeover of what it said was the nation’s last independent rocket engine maker.

“If the acquisition is approved, Lockheed will use its control of Aerojet to harm rival defense contractors and further consolidate several critical national security and defense markets,” the FTC said in a statement. “Without competitive pressure, Lockheed can raise the price the U.S. government has to pay, while delivering lower quality and less innovation.”

Lockheed is the world’s largest defense contractor and a leading missile supplier in what FTC officials called a “highly concentrated industry.” Raytheon Technologies, Inc., Northrup Grumman Corp. and Boeing also act as missile system prime contractors for the Department of Defense.

The FTC said Aerojet provides solid rocket motor fuels for missile systems and supersonic combustion ramjets, or “Scramjets,” which are air-breathing engines that power hypersonic cruise missiles.

“The proposed acquisition would give Lockheed the ability and incentive to deny, limit or otherwise disadvantage competitors’ access to critical propulsion inputs for various weapons systems,” the FTC said in a statement. “The combined venture could disadvantage competitors’ access to critical propulsion inputs for various weapons systems, the quality of technical support, and the timing and contractual terms of development and supply.”

Lockheed Martin announced the proposed acquisition in December 2020. The Ministry of Defense launched an evaluation of the deal the following month after being briefed on the deal.

On Tuesday, Pentagon chief spokesman John Kirby declined to comment on the Defense Department’s report on the merger, saying it was done internally.

In a press release also announcing its fourth quarter and full year 2021 results, Lockheed Martin acknowledged that the government was likely to oppose the merger on antitrust grounds. Lockheed Martin and Aerojet Rocketdyne had delayed closing the deal pending a federal response.

“Lockheed Martin has been advised by the FTC that its concerns regarding the transaction cannot be adequately addressed by the terms of a consent order,” the company said. “Lockheed Martin believes it is highly likely that the FTC will vote to sue to block the transaction and expects a decision by January 27, 2022.”

The company said it was weighing its options, including fighting the government order or terminating the merger agreement.

In coordinated statements, Lockheed and Aerojet Rocketdyne said the two companies “continue to believe in the benefits of the transaction for the United States and its allies, industry and all of society’s stakeholders.”

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