In December, Lockheed announced plans to buy Aerojet to bring the latter's propulsion and rocket technologies in-house. The deal is similar to Northrop Grumman's (NOC -0.64%) purchase of Orbital ATK in 2018, and would leave the nation's defense contractors with no independent propulsion specialist to source product from.
Raytheon CEO Greg Hayes, speaking at an investment conference on Wednesday, said Aerojet is "a huge supplier to us, and if that merger actually happens, you don't have an independent supplier on the solid rocket motor side." Hayes said the deal "gives us pause as we think about the competitive landscape going forward."
Hayes said Raytheon would make its concerns known to Department of Justice and Pentagon officials charged with reviewing the deal.
When the deal was announced, it was seen as an early test of how the new administration views defense industry consolidation.
Lockheed Martin officials have said they will use the Northrop/Orbital deal, which included some regulatory-mandated provisions to make Orbital tech available to rivals, as a template for approval. But some companies, including Boeing (BA -0.04%), have complained the Orbital provisions did not go far enough in ensuring fair competition.
The Pentagon will have to weigh a desire to have healthy competition for propulsion with a desire to make the technology available to all vendors. From a competitive point of view, Aerojet arguably is better served as part of a deeper-pocketed company like Lockheed Martin, especially since it is now forced to compete against an Orbital that is backed with Northrop and its substantial resources.