Lockheed Martin terminates $4.4B agreement to acquire Aerojet Rocketdyne

Feb. 13, 2022 6:38 PM ETAerojet Rocketdyne Holdings, Inc. (AJRD), LMTBy: Joshua Fineman, SA News Editor41 Comments

Lockheed Martin headquarters located in Silicon Valley

Sundry Photography/iStock Editorial via Getty Images

Lockheed Martin (NYSE:LMT) said it terminated its $4.4B agreement to purchase Aerojet Rocketdyne (NYSE:AJRD).

The decision comes after the U.S. Federal Trade Commission filed a lawsuit late last month seeking a preliminary injunction to block the acquisition, Lockheed said in a statement.

The FTC last month voted 4-0 to see an injunction to block the transaction on antitrust grounds, saying the "deal would give Lockheed the ability to cut off other defense contractors from the critical components they need to build competing missiles."

"Our planned acquisition of Aerojet Rocketdyne would have benefitted the entire industry through greater efficiency, speed, and significant cost reductions for the U.S. government," Lockheed Martin CEO James Taiclet said in a statement. "However, we determined that in light of the FTC's actions, terminating the transaction is in the best interest of our stakeholders."

The companies received a second request from the FTC on the combination in February. The combination raised some eyebrows because it would give no. 1 defense contractor Lockheed ownership of Aerojet, which produces 70% of the solid fuel rocket motors and other propulsion products used in arms from antiballistic missiles to air-to-air missiles.

"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," Aerojet said in a press release after Lockheed announced the deal termination. Aerojet will release Q4 results on Wednesday.

Truist analyst Michael Ciarmoli reiterated in a note last month that he expected Aerojet (AJRD) shares would likely trade in the mid $30s on a deal break and then expect "sideways trading for some time." Truist has a hold rating and $51 price target on AJRD.

Last week Jefferies raised its rating to buy from neutral on Aerojet, citing the standalone fundamentals of the company.

The "valuation pricing in a potential deal break rather than fundamentals, with a 25% discount to the peer group," Jefferies analyst Greg Konrad wrote in a note last week. Konrad cut AJRD his price target to $47 from $49. AJRD trades at 9.4X FY21 EV/EBITDA , a 25% discount to the group vs a 10% historical avg discount.

The deal termination comes amid an apparent boardroom battle at Aerojet. Aerojet holder Steel Holdings, which includes Executive Chairman Warren Lichtenstein, earlier this month said it was nominating seven directors to the company's board, including four incumbents.

On Friday it was disclosed that Lichtenstein and three other directors filed a lawsuit against Aerojet. In response, Aerojet CEO Aerojet CEO Eileen Drake and three other directors filed a countersuit against Lichtenstein and the other directors claiming that one director and his "collaborators" are seeking to gain control of Aerojet's board through "improper means." The countersuit also seeks to remove Lichtenstein as a director.

Recommended For You

Comments (41)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.