Orbital Sciences [ORB] CEO David Thompson said Wednesday there is no specific provision in the agreement for company’s proposed $5 billion merger with ATK [ATK] covering launch failure and that he expected the merger to continue.
Orbital suffered a catastrophic launch failure Tuesday 15 seconds after liftoff at NASA’s Wallops Island Flight Facility on the eastern shore of Virginia. The launch was part of NASA’s Cargo Resupply Services (CRS) contract to deliver cargo and supplies to the International Space Station (ISS), its third CRS effort. No one was injured, but Orbital lost the Antares rocket, the Cygnus space capsule and the cargo and supplies located inside Cygnus. CRS is NASA’s $1.9 billion contract to have Orbital deliver supplies and cargo to ISS.
ATK said Wednesday in a statement it was evaluating potential implications of the launch failure on current operating plans, long-term strategies and the proposed transaction with Orbital. Representatives from neither Orbital nor ATK responded Wednesday to requests for comment.
“(Failures) are an infrequent, but not altogether, unavoidable, occurrence in our business,” Thompson told investors Wednesday afternoon during a conference call with investors. “That’s generally appreciated all around. As far as I know, things will continue.”
Orbital Vice President and General Manager of Advanced Programs Frank Culbertson said Tuesday night the full cost of the rocket and spacecraft together was over $200 million. Culbertson said Orbital does carry some insurance on launches, including Tuesday’s, but that the amount varies depending on a variety of factors. Orbital CFO Garrett Pierce said Wednesday the company’s exposure to the mission success payment holdback from the CRS contract and the cost of any necessary facility repairs are also covered by insurance. Pierce said he hoped repairs would not be “extensive.”
“The facility seems in fairly good shape,” Thompson told investors Wednesday.
As for the downstream impact of the failure in 2015, Pierce said it is too soon to estimate those. The largest variable, he said, will likely be the length of time required to return Antares to flight status, which he said was not know as of Wednesday. Antares is not certified to fly from any other spaceport other than Wallops. Orbital’s next Antares launch was scheduled for April. Culbertson proclaimed Tuesday Orbital would return to Wallops.
Both Orbital and ATK have shareholder votes on the proposed merger scheduled for Dec. 9. Orbital’s stock finished trading Wednesday at $25.27, down nearly 17 percent on the NYSE. The proposed Orbital-ATK merger, which Orbital called a tax-free stock-for-stock merger-of-equals transaction, was valued at approximately $5 billion based on Orbital’s closing stock price April 28 of $26.57. ATK’s sporting group business is not part of the merger and will be spun off as a separate publically-traded company.