L3Harris Takes a Shot at Acquiring Aerojet Rocketdyne

In a transaction announced Sunday, L3Harris Technologies Inc. (NYSE: LHX) has reached a definitive agreement to acquire Aerojet Rocketdyne Holdings Inc. (NYSE: AJRD) in a deal valued at $4.7 billion, including Aerojet’s net debt. L3Harris will pay $58 a share in cash, a premium of 37% to Aerojet’s “unaffected” closing price as of August 15, 2022 ($42.49). On that date, activist investment firm Elliott Management revealed that it had taken a position in Aerojet.

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Two years ago, Lockheed Martin Corp. (NYSE: LMT) announced a definitive merger agreement with Aerojet Rocketdyne valued a $4.4 billion, or $56 per share. At the time, the premium was 33%. How times change.

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If Aerojet’s board changes its mind, it will cost the company $95.6 million in a termination fee. If L3Harris backs out, its termination payment to Aerojet is set at $406.3 million.

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Lockheed Martin ended its December 2020 bid for Aerojet in February after the Federal Trade Commission sued to block the deal for anti-competitive reasons. Lockheed wanted to acquire the missile propulsion systems the country’s largest defense contractor was using in its hypersonic missile project.

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A combined Aerojet-L3Harris would have a market cap of around $45 billion. That would not alter L3Harris’s ranking, however, leaving it in sixth place behind McKesson.

Aerojet’s stock traded up about 1% in Monday’s premarket at $55.41. L3Harris shares traded down about 1.7% at $209.57.