Pentagon Backs L3Harris Rocket Motor Spinoff with $1 Billion Investment

The Pentagon is investing $1 billion in L3Harris Technologies' rocket motor business, planning a 2026 IPO. This marks the first direct supplier partnership, aiming to build a resilient supply chain. This investment sparks concerns over potential conflicts of interest and impacts competition in the defense sector.

The U.S. government's $1 billion investment in L3Harris Technologies marks a critical step in ensuring a consistent supply of rocket motors, vital for missiles like Tomahawks and Patriots. In anticipation of this backing, L3Harris shares surged by 11.4% in pre-market trading in New York.

This initiative represents a strategic shift for the Pentagon, focusing on direct supplier partnerships to fortify the defense supply chain. The investment includes a government convertible security that will transform into equity upon the company's 2026 IPO, making this the first arrangement of its kind in defense contracting.

However, the investment raises potential conflict of interest issues, as it positions the government with an ownership stake in L3Harris, a frequent bidder on defense contracts. While promising for L3Harris, this could face opposition from industry rivals concerned about market competition effects.

(With inputs from agencies.)