FTC Sues To Block Billions Defense Merger

The Federal Trade Commission (FTC) is Suing to block a $4.4 billion Merger between the Defense manufacturing giant, Lockheed Martin, and the Missile Propulsion company Aerojet Rocketdyne.

The FTC said the Combination would concentrate too much Power in the hands of Lockheed, the World’s Largest Defense contractor, which announced the Merger in late 2020.

The FTC is concerned that Lockheed could press its advantage to Harm rival Defense Contractors that purchase Aerojet’s Solid Rocket Motors to build Missiles for the Military, with the Military and Taxpayers paying the price.

“Without competitive pressure, Lockheed can jack up the price the U.S. government has to pay, while delivering lower quality and less innovation,” said Holly Vedova, the dDrector of the FTC’s Bureau of Competition. “We cannot afford to allow further concentration in markets critical to our national security and defense.”

Executives said in a recent Corporate earnings call that the company would review the FTC’s Complaint and respond in due course. An Administrative Trial on the matter is scheduled to begin June 16.

This is the First instance in Decades in which Federal Regulators have intervened to Block a Defense merger.

In the late years of the Clinton Administration, Lockheed’s attempt to swallow up Northrop Grumman was rebuffed by Regulators, but subsequent Administrations have taken a more hands-off approach.

The Trump Administration, in particular, allowed Merger after Merger to sail through, including significant, multibillion-dollar Buyouts by Northrop Grumman and Raytheon.

Lockheed, Northrop Grumman, and Boeing, are the Primary suppliers of Missiles to the Defense Department. Aerojet is One of just Two Suppliers of the Rocket Motors that power those Weapons, the other being Northrop Grumman.

Allowing the Merger to go through would Eliminate the Last “independent” Manufacturer of Advanced Missile Propulsion systems, the FTC concluded.

Northrop Grumman’s advantage in that space was extended by the $7.8 billion Purchase of the Rocket components firm Orbital ATK, which was announced in 2017 and later Approved.

“The combined firm could disadvantage rivals by affecting the price or quality of the product, the quality of the engineering support, and the schedule and contract terms for developing and supplying it or otherwise disadvantage its rivals,” the FTC wrote in a News Release.

Loren Thompson, a Defense Industry Analyst, whose Nonprofit Lexington Institute gets Contributions from Lockheed Martin, said he thinks Lockheed probably will walk away from the Deal. “It’s a small transaction, and it’s become too much of a distraction,” Thompson said. “This has dragged on for too long.”

He added that he thought Aerojet eventually would land in the hands of a Private-Equity firm, which would run the business with a focus on extracting Cash and ultimately allow the company’s Innovative edge to Diminish.

“The FTC has left the industry in a somewhat unbalanced state because Orbital [ATK] is now owned by the very large Northrop Grumman, and Aerojet is left to fend for itself,” Thompson said.










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