In what can only be seen as a further consolidation move by the “legacy” aerospace contractors, Lockheed Martin (NYSE: LM) will acquire Aerojet Rocketdyne (NYSE: AJRD) in a $5.0 billion cash deal. The deal will pay a cash value of $56 per share for Aerojet, a 30% premium over their closing price from December 18.

Lockheed Martin was originally founded in 1926 as the Lockheed Corporation. It became Lockheed Martin in 1995 when it merged with Martin Marietta, another large defense contractor. Both Lockheed and Martin were both already conglomerates in their own rights when the merger happened in 1995. It resulted in the largest defense contractor in the world, accounting for 10% of the US military budget. In the aerospace realm, Lockheed has been a provider of satellite bus technology, specialized systems such as the Hubbell and Spitzer Space telescopes, and military payloads such as GPS-III. Lockheed is also a partner in the United Launch Alliance joint venture with Boeing, that produces EELVS (enhanced expendable launch vehicle systems) such as Centaur, Delta, and Atlas rockets.

Aerojet Rocketdyne is itself an amalgamation of Aerojet and Pratt and Whitney Rocketdyne. It is the US leader in rocket engine development, having provided engines to both Saturn Vehicles (Rocketdyne H-1 first stage engines) and the RS-25 engines used on the Space Shuttle and SLS. By acquiring Rocketdyne Lockheed CEO James Taiclet has stated that the company will gain a foothold in the space and hypersonic fields.

This type of merger is common in the already highly incestuous launch industry, where each company is connect to all the others either through products or personnel. And while the newest merger will be good for Lockheed and perhaps the EELV industry, the real victim is competition which can drive down launch costs.

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