Please ensure Javascript is enabled for purposes of website accessibility

Raytheon Will Challenge Lockheed/Aerojet Deal

By Lou Whiteman - Updated Feb 17, 2021 at 2:07PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Lockheed rivals fear the deal will leave them at a competitive disadvantage.

Raytheon Technologies (RTX 1.54%) says it intends to challenge a planned $4.4 billion acquisition of Aerojet Rocketdyne (AJRD 1.55%) by Lockheed Martin (LMT 0.10%) on concerns the deal is anticompetitive.

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 -0.04%) purchase of Orbital ATK in 2018, and would leave the nation's defense contractors with no independent propulsion specialist to source product from.

A solid-state rocket test.

A test of an Aerojet Rocketdyne motor. Image source: Aerojet Rocketdyne

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 4.64%), 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Raytheon Technologies Corporation Stock Quote
Raytheon Technologies Corporation
RTX
$95.00 (1.54%) $1.44
The Boeing Company Stock Quote
The Boeing Company
BA
$127.73 (4.64%) $5.67
Lockheed Martin Corporation Stock Quote
Lockheed Martin Corporation
LMT
$447.99 (0.10%) $0.45
Northrop Grumman Corporation Stock Quote
Northrop Grumman Corporation
NOC
$467.43 (-0.04%) $0.19
Aerojet Rocketdyne Holdings, Inc. Stock Quote
Aerojet Rocketdyne Holdings, Inc.
AJRD
$41.22 (1.55%) $0.63

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
332%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.