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The US government is stepping in to try to block a $4.4 billion bid by Lockheed Martin to purchase Sacramento, California-based Aerojet Rocketdyne, which supplies missile propulsion systems.
On Tuesday, the Federal Trade Commission (FTC) announced that it is filing a lawsuit to prevent the takeover of the company, which it says is the nation’s last independent rocket engine maker.
“If the acquisition is allowed to continue, Lockheed will use its control over Aerojet to undermine competing defense contractors and further consolidate multiple markets critical to national security and defense,” the FTC said in a statement. “Without competitive pressure, Lockheed can increase the price the US government has to pay while offering lower quality and less innovation.”
Lockheed is the world’s largest defense contractor and a leading missile supplier in what FTC officials say is a “highly concentrated industry.” Raytheon Technologies, Inc., Northrup Grumman Corp. and Boeing also act as the Ministry of Defense’s missile system prime contractors.
The FTC said Aerojet provides solid rocket engine fuels for missile systems and “Scramjets,” which are air-breathing engines that propel supersonic combustion ramjets or hypersonic cruise missiles.
“The proposed acquisition will give Lockheed the ability and incentive to deny, limit, or otherwise disadvantage competitors access to critical propulsion inputs for various weapons systems,” the FTC said in a statement. “The merged firm may put competitors at a disadvantage in accessing critical propulsion inputs for various weapon systems, the quality of engineering support, and the program and contract terms to develop and supply it.”
Lockheed Martin announced the proposed acquisition in December 2020. The Department of Defense began an evaluation of the deal the month after it was notified of the deal.
On Tuesday, Pentagon chief spokesman John Kirby declined to comment on the Defense Department’s report on the merger, saying it was done internally.
Lockheed Martin acknowledged in a press release that also announced fourth-quarter and full-year 2021 earnings, that the government would likely oppose the merger on antitrust grounds. Lockheed Martin and Aerojet Rocketdyne had given up on closing the transaction pending a federal response.
“The FTC has informed Lockheed Martin that its concerns about the transaction cannot be adequately addressed under the terms of a consent order,” the company said. “Lockheed Martin believes it is most likely that the FTC will file a lawsuit to block the transaction and expects them to issue a decision before January 27, 2022.”
The company said it was considering its options, including tackling the government order or ending the merger deal altogether.
In coordinated statements, Lockheed and Aerojet Rocketdyne said both companies “believe in the benefits of the transaction for the United States and its allies, the industry and all of the company’s stakeholders.”
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