Lockheed Martin faces FTC antitrust concerns over Aerojet deal

The U.S. Federal Trade Commission (FTC) has told Lockheed Martin that its planned $4.4 billion deal for rocket specialist Aerojet Rocketdyne will raise antitrust concerns. Aerojet's shares fell 16% to $37.80 in pre-market trading, with the business having been valued at $51 per share in Lockheed's offer. Lockheed shares were up 0.5% at $375.

The FTC had said that "concerns regarding the transaction cannot be adequately addressed by a consent order", Lockheed said on Tuesday, which would require it to abandon the transaction or launch a lawsuit to close the deal. The deal has drawn criticism because it would give Lockheed, the No.1 U.S. defense contractor by revenue, a dominant position over a vital piece of the U.S. missile industry.

Rocket motors are used in everything from the homeland defensive missile system to Stinger missiles. Missile maker Raytheon has been an outspoken opponent of the proposed deal.

The deal announced in late 2020 is Lockheed's first large acquisition under new CEO Jim Taiclet and would reshape the competitive landscape for solid rocket fuel missiles used with jets and drones. Aerojet develops and manufactures liquid and solid rocket propulsion, air-breathing hypersonic engines and electric power and propulsion for space, defense, civil and commercial applications.

Its customers include the Pentagon, NASA, Boeing, Lockheed Martin, Raytheon Technologies and the United Launch Alliance. The deal has also found opponents on Capitol Hill.

U.S. Senator Elizabeth Warren, who has a keen interest in corporate behavior, asked the FTC to examine the premise and efficacy of internal firewalls such as those Lockheed has proposed to prevent it from gaining a competitive advantage over peers once the deal closes, according to a July 16 https://www.reuters.com/business/aerospace-defense/senator-warren-questions-lockheeds-antitrust-solution-buy-aerojet-2021-07-20 letter. In general Warren has asked the FTC to take a tougher look at defense industry mergers.

Other senators have criticized defense industry consolidation, saying it has hurt innovation and made weapons more expensive for the Department of Defense.

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