American advanced technologies company Lockheed Martin has entered into an agreement to acquire rocket engine manufacturer Aerojet Rocketdyne for $4.4 billion. Lockheed has agreed to take over Aerojet's debt and net cash on hand.
Under the agreement, Lockheed will be paying $56 for each Aerojet share. This represents a 33% premium over Aerojet's Friday closing price of $42.04 per share.
"This transaction enhances Lockheed Martin's support of critical U.S. and allied security missions and retains national leadership in space and hypersonic technology," Lockheed Martin's chief executive officer, James Taiclet, said in a statement announcing the agreement.
Taiclet said that the acquisition of Aerojet's technologies and manufacturing capabilities should allow it to reduce costs for both its customers and taxpayers. He said that rocket engines are essential components for the country's defense industrial base.
Once the deal is completed, Aerojet Rocketdyne shareholders will receive a pre-closing dividend of $5 per share in common stock and convertible senior notes. The dividends are expected to be distributed in March 2021. The deal is still pending approval by shareholders and regulators.
Sources with knowledge in the matter said that if the terms of the proposed dividends are approved, the purchase price for the company could be reduced to around $51 per share. Lockheed Martin said that the deal is expected to be closed within the second half of 2021.
Citigroup Global Markets Inc. and Evercore are acting as advisers for the transaction. Jenner & Block LLP and Gibson, Dunn & Crutcher LLP are acting as counsels.
Lockheed Martin said that it will be forming transitional teams that will help in the seamless integration of operations for both companies. The company said that the teams will ensure continuity for the merged company's customers and stakeholders.
Aerojet Rocketdyne - formerly known as the General Tire and Rubber Company - has 15 primary operations sites in the U.S. and nearly 5,000 employees. In 2019, the company generated around $2 billion in revenue from its aerospace, defense and real estate businesses.
Lockheed Martin currently utilizes several of Aerojet's products, including its propulsion systems for its fire control, missiles, space and aeronautics business offerings.
