Lockheed drops deal with rocket engine maker after US legal challenge

Lockheed Martin has dropped its $4.4 billion bid to buy rocket engine maker Aerojet Rocketdyne after the US Federal Trade Commission sued to block the deal, saying it would cut competition and raise prices in the defense sector.

The collapse of the takeover is the FTC’s second major victory in a week after SoftBank scrapped its $66 billion plan to sell British chip company Arm to Nvidia amid resistance from the government. agency and other national competition regulators.

Lina Khan, chair of the FTC, has pledged to oversee much tougher enforcement of U.S. antitrust rules as part of an effort by Joe Biden’s administration to tackle concentrations of corporate power in the US. economy.

Based outside of Washington, Lockheed is the world’s largest defense contractor. The company announced its agreement to acquire Aerojet in December, saying it would “preserve and strengthen an essential component of the national defense industrial base and reduce costs for our customers and the American taxpayer.”

However, the plan quickly met with resistance in Washington. Elizabeth Warren, a Democratic senator from Massachusetts, wrote to the FTC to oppose the deal, warning that “waves of merger and consolidation [have] transformed the country’s defense industry from a competitive market with more than 50 companies to an oligopoly of only five major rivals”.

The FTC filed a lawsuit to block the deal last month, calling it the agency’s first contentious challenge to a defense merger in decades. He said the US Department of Defense also reviewed the potential acquisition and considered its impact.

Holly Vedova, director of the commission’s competition bureau, said at the time: “Lockheed is one of the few missile intermediaries the U.S. military relies on to provide vital weapons that keep our country safe. . . . Without competitive pressure, Lockheed can raise the price the US government has to pay, while offering lower quality and less innovation.

The decision to drop the takeover is a blow to Lockheed’s development of hypersonic weapons, a priority for the US government given China’s sudden technological breakthrough.

“Our planned acquisition of Aerojet Rocketdyne would have benefited the entire industry through greater efficiency, greater speed and significant cost reductions for the U.S. government,” said James Taiclet, Chief Executive Officer of Lockheed. Martin. “However, we have determined that in light of the actions of the FTC, terminating the transaction is in the best interests of our stakeholders.”

Aerojet said in a statement it was “confident” about its future performance and would provide more details on its strategy when it reports results on Thursday.

Lockheed already uses Aerojet propulsion systems in several of its products. But it had hoped to integrate its 15 manufacturing sites and 5,000 employees as part of the deal.

About Charles D. Goolsby

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