GenCorp Inc. [GY] yesterday said it has agreed to acquire the Rocketdyne rocket engine business from United Technologies Corp. [UTX] for $550 million in a deal that would significantly increase the company’s heavy lift engine business.
UTC is selling Rocketdyne, which it acquired in 2005 from Boeing [BA] for about $700 million, to raise proceeds for its pending acquisition of Goodrich [GR].
There is very little overlap between GenCorp’s Aerojet propulsion and motors business and Rocketdyne. Aerojet is known more for its tactical rocket motors and propulsion business, although the company manufactures or modifies three engines for different space launch vehicles, including a solid rocket motor for the Atlas launch vehicle and the second stage of the Delta II rocket.
Aerojet is also modifying an old Russian liquid rocket engine to be used in the first stage of Orbital Sciences Corp.’s [ORB] Antares medium-class launch vehicle that is slated for its first flight later this year.
Rocketdyne produces the RL10 upper stage engine for the Atlas V launch vehicle along with the RD-180 booster rocket, which it provides through its RD Amross joint venture with Russia’s Energomash. Delta launchers are powered by Rocketdyne’s RL10 and RS-68 booster.
United Launch Alliance, a joint venture between Boeing and Lockheed Martin [LMT], provides launch services for the Atlas and Delta launch vehicle families.
Rocketdyne is also on NASA’s new Space Launch System, providing the J-2X upper stage engine and RS-25 booster engine.
GenCorp CEO Scott Seymour said in a statement that the pending deal “almost doubles the size of our company and provides additional growth opportunities as we build upon the complementary capabilities of each legacy company.” He also said that the acquisition has “strategic value…for the country, our customers, other partner supply base and your shareholders. The combined enterprise will be better positioned to compete in a dynamic, highly competitive marketplace, and provide more affordable products for our customers.”
The U.S. government is increasingly looking for faster, cheaper and more responsive access to space.
Companies such as ATK [ATK], which provides key solid rocket engine systems as well as system integration, Orbital Sciences and SpaceX Corp. are all vying to provide the government with its needs here. Other companies such as XCOR and Sierra Nevada Corp. are also developing and manufacturing space propulsion systems aimed at meeting the government’s and other customers’ demands for quicker and more affordable access to space.
Aerojet believes it can also be responsive to the government’s needs. The company has been cross-training its engineers so that they work between solid rocket and liquid rocket motors, and preaching the themes of agility, affordability and responsiveness.
The acquisition is expected to close in the first half of 2013 and be accretive to earnings in the first year. GenCorp had about $918 million in sales last year, almost all of it from Aerojet.
Jim McAleese, an industry observer, told Defense Daily that the proposed acquisition is likely to sit well with the Defense Department because it will maintain competition in a key area, in this case rocket engine systems, while also shoring up the industrial base in a period when there are few major opportunities for new space launch systems.
Rocketdyne, which is part of UTC’s Pratt & Whitney segment and is based in California, also makes engine products for missile defense systems and hypersonic engines.
Citigroup is the financial adviser to GenCorp on the transaction. The deal is being financed with cash on hand and new debt. GenCorp said that Morgan Stanley and Citigroup are providing the financing.