Department of Defense says Merger Would Stifle Domestic Rocket Industry

Aerojet Rocketdyne has posted an update on its proposed merger with Lockheed Martin following concern from the Federal Trade Commission over aspects of the transaction.

Their announcement that they would not close the transaction prior to the 27th, was overshadowed by the nearly simultaneous release of the FTC's lawsuit to put a stop to the deal. The choice to go ahead with the merger and fight it out in court, or step away and terminate the agreement lies with Lockheed Martin, said Aerojet. 

The FTC has decided to file suit to put a stop to the proposed acquisition of Aerojet, alleging that combining the two companies, some of the largest manufacturers of rocket engines and spacecraft propulsion, would allow Lockheed to bludgeon competition with its size. The Department of Defense drew attention to the acquisition and found potential impacts of the transaction on national security, mainly a stifling effect on the industrial and technological base of the spacefaring equipment sector.

Eliminating competition in the sector, one which depends heavily on aggressive competition for government contracts, would ultimately hurt American interests more than it would help, according to them. The FTC thanked the department for their assistance in evaluating the merger, making sense of the industry’s landscape and Aerojet’s place in it. 

“Aerojet, as a subcontractor, is the last independent U.S. supplier of critical inputs for missile systems, hypersonic cruise missiles, and missile defense kill vehicles. Aerojet and only one other competitor – Northrop Grumman – compete to provide propulsion inputs for missile systems and hypersonic cruise missiles to defense prime contractors,” said the FTC in its statement announcing the suit.

“Lockheed’s proposed acquisition of Aerojet would give Lockheed control over critical propulsion inputs that its rivals require to compete against Lockheed. Specifically, the complaint alleges that the proposed acquisition would give Lockheed the ability and incentive to deny, limit, or otherwise disadvantage competitors’ access to critical propulsion inputs for various weapons systems. The combined firm could disadvantage rivals by affecting the price or quality of the product,” they continued. 

"The U.S. government in turn would be harmed because the cost of missile systems, missile defense kill vehicles, and hypersonic cruise missiles would likely increase, innovation would be lessened, and quality would be reduced, hindering national security and defense interests."

FMI: www.ftc.gov