End of Lockheed bid for Aerojet Rocketdyne could impact space and missile markets, experts say

Aerojet Rocketdyne tested an RS-25 engine for NASA’s Space Launch System moon rocket at Stennis Space Center in Mississippi in 2017. Photo courtesy of Aerojet Rocketdyne

Lockheed said Monday it was abandoning the proposed merger because the Federal Trade Commission filed a lawsuit to block the deal over concerns that Maryland-based Lockheed could gain a stranglehold on production of missiles.

But the end of Lockheed’s bid doesn’t mean someone else won’t come along to buy Aerojet, according to Cynthia Cook, director of the Center for Strategic and International Studies, a Washington, DC-based think tank.

“It wouldn’t be surprising if Aerojet ended up being taken over by another company – the fact that they agreed to be taken over by Lockheed Martin indicates that they are open to this, even though they issued a statement saying that they would continue as an independent company,” Cook, who leads the center’s defense industry initiatives group, told UPI.

And although the Biden administration has signaled it will oppose anti-competitive consolidation in the defense industry, Lockheed and other contractors may soon seek other acquisition targets, she said. .

“It’s too early for us to know how the Biden administration will handle similar deals in the defense sector. We need a few more examples before we can draw any conclusions,” Cook said.

Aerojet Rocketdyne is best known for producing RS-25 rocket engines that powered the Space Shuttle, while it modified those for use on NASA’s new SLS moon rocket. The space agency is preparing to launch an uncrewed SLS this spring.

Aerojet is also working on engines for hypersonic missile systems, a niche where it has only one other US competitor, Virginia-based Northrop Grumman.

Lockheed CEO James Taiclet said in a statement on Monday that the purchase of Aerojet “would have benefited the entire industry through greater efficiency, greater speed and significant cost reductions for the American government”. But he said the company doesn’t want to file a federal lawsuit against the FTC.

The FTC had argued that buying Aerojet would have allowed Lockheed to cut off other contractors from critical components needed to build missiles.

“Without competitive pressure, Lockheed can raise the price the U.S. government must pay, while delivering lower quality and less innovation. We cannot afford to allow additional focus on markets critical to our security and our national defenses,” said Holly, director of the FTC’s Competition Bureau. Vedova said in a press release.

But trying to block Lockheed’s deal makes no sense if the government wants to see Aerojet Rocketdyne thrive, Marco Cáceres, space analyst for Virginia-based Teal Group, told UPI in an interview.

It’s important to recognize that Aerojet faces stiff competition for Elon Musk’s SpaceX rocket engines, many small launch vehicles and Jeff Bezos’ Blue Origin, Cáceres said.

SpaceX makes its own rocket engines, while Blue Origin is trying to develop a new engine for United Launch Alliance, which is jointly owned by Lockheed and Boeing.

These new space companies, however, have shown no interest in building missile engines, he noted.

“The only thing the government should do to promote competition and provide more diversity in terms of competitive launch is precisely to have authorized” the merger, he said.

“I think you stand to lose Boeing and Lockheed, two big historical companies in launch services, because they just can’t compete on price with SpaceX, they don’t have the reusable technology either,” said Caceres.

The International Space Station is pictured from the SpaceX Crew Dragon Endeavor during a flyby of the orbiting laboratory that took place after it undocked from the space-facing port of the Harmony module on November 8. Photo courtesy of NASA