FTC Move To Block Lockheed-Aerojet Merger Could Push Rocket Maker Into The Arms Of Private Equity (From Forbes)

The Federal Trade Commission’s move to block a merger of Aerojet Rocketdyne with Lockheed Martin will have minimal impact on Lockheed, because Aerojet would have only added 3% to its annual revenues. Lockheed has bigger opportunities to pursue. However, for Aerojet the agency’s position is a problem. By signaling a willingness to be acquired, Aerojet has put itself in play. But the FTC effectively eliminated any first-tier defense integrator from becoming a suitor, while discouraging foreign buyers by playing up the company’s importance to national security. Defense services companies like Leidos are likely to be deterred from bidding by Aerojet’s high fixed costs and the inherent risks of building rocket engines. That leaves private equity as the most probable suitor, but the natural reflex there would be to generate more cash from operations by cutting unnecessary outlays. End result: less money available for innovation, a pillar of the Aerojet culture. Time will tell whether the new antitrust thinking at the FTC rescues competition in the rocket-engine business, or assures its demise. I have written a commentary for Forbes here.