Lockheed Martin Corp. agreed to acquire the defense industry supplier Aerojet Rocketdyne Holdings Inc. in a deal valued at $4.4 billion.
As part of the transaction, Aerojet declared a $5 per share special dividend, to be paid on March 24, to holders of record as of March 10. The payment of that special dividend will adjust the $56 per share consideration to be paid by Lockheed Martin, according to a statement Sunday. At $51, Lockheed will be buying Aerojet at a 21 percent premium from the closing price on Friday.
Chief Executive Officer Jim Taiclet, who stepped into the top job this year, has said he was keen to expand the world’s largest defense contractor through acquisitions. With Aerojet, he’s picking up a key US supplier of propulsion systems for missiles, rockets and other space and defense applications.
“Acquiring Aerojet Rocketdyne will preserve and strengthen an essential component of the domestic defense industrial base,” Taiclet said in the statement.
Lockheed has been scouting for deals. In January, the company said it’s flush with cash and open to deals as rival Raytheon Co. prepares to combine with United Technologies Corp. to create an aerospace-and-defense powerhouse. Lockheed has been seeking opportunities to “bring in the technologies faster into the company that we think are going to be crucial for the future,” Taiclet said during its October earnings call. “So we plan to be active, but we also plan to be very, very prudent.”
The Aerojet transaction is expected to close in the second half of 2021 after getting regulatory approvals and a nod from Aerojet’s shareholders.
Aerojet rose 0.5 percent to $42.04 Friday, giving the El Segundo, California-based company a market value of $3.25 billion. Lockheed climbed 1 percent to $356.03 for a market value of about $100 billion.
Aerojet’s stock is trading at 25 times expected earnings, compared with 16 times for Lockheed. Aerojet’s shares have fallen 7.9 percent this year and Lockheed dropped 8.6 percent, both underperforming the S&P 500 Index, which climbed 15 percent.
Lockheed’s space division is its third-largest business, contributing 18 percent of its 2019 revenue. The company competes with Elon Musk’s SpaceX for US government rocket launches through the United Launch Alliance, its joint venture with Boeing Co.
Lockheed was advised by Goldman Sachs, Ardea Partners and Hogan Lovells, while Citigroup and Evercore, as well as Jenner & Block and Gibson, Dunn & Crutcher represented Aerojet.