ATK [ATK] and Orbital Sciences [ORB] on Tuesday evening said they still support a merger of the two companies despite a spectacular failure of a rocket built by Orbital as it was launching.
Following a review of the Antares launch failure and Orbital’s business prospects, “We believe it was responsible and essential to conduct this special due diligence and as a result of our findings, management and our board of directors continue to endorse the previously announced transaction,” Mark DeYoung, ATK’s president and CEO, said in a statement.
The $5 billion deal, which was announced in late April and was expected to close in December, is now scheduled to close in February 2015 although it still requires approvals from government regulators and stockholders of both companies. ATK and Orbital have postponed shareholder meetings to vote on the transaction from Dec. 9 until Jan. 27, 2015.
The Oct. 28 rocket explosion led ATK to conduct the review of the pending transaction. An accident investigation is ongoing but Orbital has said the evidence suggests the failure was caused by the first stage engine, which is a refurbished Russian system (Defense Daily, Oct. 31). The Antares rocket was taking off from NASA’s Wallops Island flight facility in Virginia on a cargo mission to resupply the International Space Station when it blew up on the launch pad.
DeYoung and ATK Chief Financial Officer Neal Cohen on Wednesday will host a conference call and webcast to update investors on the just completed review of the launch failure, the recovery plan and the Orbital’s “long-term competitive position,” ATK said.
David Thompson, Orbital’s chairman, president and CEO, said in a statement that it expects to meet its commitments to NASA’s space program.
“Working with NASA, our primary Antares customer, and our industrial suppliers, Orbital has implemented a comprehensive go-forward plan to fulfill the company’s commitment to the space agency’s commercial cargo program and to upgrade the propulsion system on the Antares rocket. As previously announced, Orbital does not believe this plan will cause material adverse financial changes in 2015 or future years.”
The merger plan with Orbital also calls for ATK to spin-off its business that sells ammunition, rifles and related accessories to the sporting market. DeYoung plans to update investors on the call on the sporting market and may discuss the company’s outlook and strategy.
Under the merger plans, ATK stockholders would have a 54 percent stake in ATK, although the combined company would be led by Thompson as president and CEO. Orbital will hold nine of the 16 board seats on Orbital ATK and ATK Chairman Ronald Fogleman will chair the new company. DeYoung will lead Vista Outdoor, the name given to the sporting business that ATK will spin out after the transaction with Orbital closes.