Lockheed Martin Cancels Aerojet Rocketdyne Merger After Antitrust Pressure

Lockheed Martin has called off its $4.4 billion acquisition of rocket propulsion manufacturer Aerojet Rocketdyne—canceling the deal after the Federal Trade Commission filed an antitrust lawsuit that accused Lockheed of using the buyout to create a monopoly.

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Lockheed, the world’s largest defense contractor, said Sunday that it will not move forward with its purchase of El Segundo-based Aerojet Rocketdyne after the FTC sued last month to block the transaction. The merger, which was first announced in December 2020, raised antitrust concerns that Lockheed could “cut off” other defense contractors from key missile components built by Aerojet, described by the FTC as the “last independent U.S. supplier of missile propulsion systems.”

“Our planned acquisition of Aerojet Rocketdyne would have benefitted the entire industry through greater efficiency, speed, and significant cost reductions for the U.S. government,” Lockheed Martin CEO James Taiclet said in a statement. “However, we determined that in light of the FTC's actions, terminating the transaction is in the best interest of our stakeholders.”

The deal has sparked conflict within Aerojet Rocketdyne’s hierarchy, as well—leading to a proxy war between board members vying for control of the company, Law360 reported last week. Aerojet CEO Eileen Drake and three other board members have sued four fellow directors including executive chairman Warren Lichtenstein, who allegedly opposed and sought to undermine the Lockheed deal. Lichtenstein has leveraged his investment firm, Aerojet shareholder Steel Partners Holdings, to propose a new CEO and board of directors at the company.

Aerojet’s lawsuit alleges that Lichtenstein was “clandestinely telling industry participants that he is unhappy with Aerojet’s agreement to merge with Lockheed Martin,” and that he planned to take over the company if the merger failed. In turn, the lawsuit seeks to remove Lichtenstein from Aerojet’s board. Lichtenstein told Law360 that the board was “evenly split” regarding the Lockheed merger and claimed that Aerojet Rocketdyne is seeking to discredit him with its lawsuit.

With the Lockheed deal now in tatters, Aerojet could still market itself for a similar buyout by another company—though that may have to involve a smaller aerospace and defense firm, or a private investor, in order to avoid further antitrust scrutiny. Aerojet said it will update investors on its acquisition strategy when it reports its quarterly earnings Feb. 17.