A cash offer, as opposed to stock, could make the rumored Aerojet Rocketdyne [AJRD] offer for United Launch Alliance (ULA) legitimate, according to a veteran industry executive.
“I could see it happening if (Aerojet Rocketdyne) was paying cash,” NexGen Space LLC President and former NASA senior adviser for commercial space Charles Miller said Sept. 9. “If it’s equity, and you’re buying into future business that is non-competitive, why would you take equity? That would be a bad deal.”
Reuters reported Sept. 8 evening that Aerojet Rocketdyne submitted a $2 billion offer to acquire ULA, a joint venture of Lockheed Martin [LMT] and Boeing [BA]. Reuters said Aerojet Rocketdyne board member Warren Lichtenstein, chairman and chief executive of Steel Partners LLC, approached ULA President Tory Bruno and senior Lockheed Martin and Boeing executives about the bid in early August. Lockheed Martin spokesman Dan Nelson declined comment on Sept. 9.
Miller said Aerojet Rockedyne forcing ULA to use its AR-1 engine is the strategy behind the rumored deal. ULA rebuffed Aerojet Rocketdyne’s efforts to acquire the data rights to the Atlas V rocket, which ULA will eventually retire in favor of the new Vulcan launch vehicle, of which it is teaming with Blue Origin.
Blue Origin will supply its BE-4 engine to serve as the first stage booster on ULA’s Vulcan. Aerojet Rocketdyne is marketing the AR-1 as an American-made, drop-in solution for the Russian-developed RD-180 engine that currently powers the Atlas V, though many experts disagree that an engine can be properly retrofitted into an existing launch vehicle.
ULA’s Vulcan plans could hit Aerojet Rocketdyne twice as Miller said ULA is considering three engines for the Vulcan upper stage. One is a XCOR Aerospace-developed engine, another is Blue Origin’s BE-3, while the third is Aerojet Rocketdyne’s RL-10 that currently powers the Centaur upper stage used in the Atlas V. Miller said as the AR-1 has a “huge” overhead cost that would make it unable to compete on the commercial market, if Aerojet Rocketdyne was to lose the ULA national security business, it would be left with its NASA Space Launch System business.
An Aerojet Rocketdyne-ULA deal could also squeeze the lower levels of the two companies’ supply chains. James Muncy, founder of independent space policy consultancy PoliSpace, said Sept. 10 if the rumored acquisition took place, the company would stop working with other companies under pressure to integrate costs. If the new company wanted to replace Aerojet Rocketdyne’s RL-10, Muncy said, it wouldn’t want the rumored new company to buy an engine from another company, but from Aerojet Rocketdyne, or spend money improving the RL-10.
Muncy said one good side of the rumored arrangement would be freeing ULA from parents companies Lockheed Martin and Boeing. Muncy said ULA’s number one challenge is that they are owned by companies that don’t want ULA to compete with them.
“ULA cannot aggressively build new business in the private sector, or with the public sector, because its parents don’t want them to,” Muncy said.