Lockheed Martin announced on Sunday that it is terminating a $4.4 billion agreement to acquire rocket engine maker Aerojet Rocketdyne Holdings amid staunch opposition by antitrust authorities in the US.
According to the aerospace company, the decision to call off the deal was triggered by a US Federal Trade Commission lawsuit filed in January asking the court to issue a preliminary injunction to block the deal.
American antitrust officials and defense firms such as Raytheon Technologies opposed the acquisition, claiming it would allow Lockheed to use its control over the California-based manufacturer to “hurt” other defense contractors.
According to the suit, the takeover would have given Lockheed Martin “a dominant position” over solid-fuel rocket engine manufacturing, a vital component of the US missile industry.
Despite these assertions, company chief executive officer James Taiclet said that the takeover would have benefitted the entire defense industry in the US since it would enable greater efficiency, speed, and significant cost reductions in producing cutting-edge military solutions.
Explaining the company’s recent decision, he stated that terminating the multibillion-dollar agreement is “in the best interest” of company stakeholders.
“We stand by our long heritage as a merchant supplier and trusted partner and will continue to support Aerojet Rocketdyne and other essential suppliers in the Defense Industrial Base still overcoming the challenges of the pandemic,” Taiclet remarked.
Aerojet Statement
Following the cancellation announcement, Aerojet Rocketdyne issued a separate statement saying the company still expects strong performance in the future despite the scrapped agreement.
The firm vowed to deliver “substantial value” to its shareholders by becoming a leader in the space exploration and defense market, as well as continuing to advance hypersonic and strategic, tactical, and missile defense systems.
“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 stated in the press release. “We look forward to providing further details regarding our financial performance and strategy.”
‘Moving Forward’
Taiclet said that since the deal has been canceled, his company will focus on the most effective use of capital with the highest return on investment amid its ongoing commitment to bring value to shareholders.
He expressed confidence in Lockheed’s “strong foundation and growth potential” as several defense-related projects are poised to enter production.
“We will continue to support the United States and its allies through our industry leadership and developing the technologies to ensure effective threat deterrence for decades to come,” Taiclet stressed.