Sunday, September 13, 2015

Aerojet to Push Bid for Boeing-Lockheed Venture at Aerospace Gathering

The Wall Street Journal
September 13, 2015 6:26 p.m. ET

Aerojet Rocketdyne Holdings Inc. officials hope to use an aerospace conference that kicks off Monday to promote their uphill bid to acquire the Pentagon’s leading satellite launch provider, according to people familiar with the matter.

When military and defense-industry officials gather at the Air Force Association’s air and space conference in suburban Washington, a major topic of discussion on the sidelines is likely to be Aerojet Rocketdyne’s $2 billion offer for United Launch Alliance LLC, a 50-50 rocket venture between Lockheed Martin Corp. and Boeing Co.

Aerojet Rocketdyne officials hope to discuss the bid with the joint venture’s parents, as well as Air Force brass, according to people familiar with the matter.

“We might see some movement” after those efforts, one person said, “either positive or negative.”

As of Saturday, the joint venture hadn’t allowed Aerojet Rocketdyne representatives to conduct due diligence on its books, according to this person.

The offer has been pending for weeks. Aerojet Rocketdyne initially had hoped to wrap up negotiations in time to make a big splash with an announcement during the aerospace conference. But disputes over valuation and questions about possible responses by the Pentagon have complicated the process, according to people familiar with the details.

In addition, Boeing has balked at selling, according to several people, partly because United Launch’s leadership has held out the possibility of granting Boeing lucrative contracts to produce components for the Atlas V rocket.

The parts could be manufactured at a government-owned facility in New Orleans where Boeing already builds parts for a different rocket being developed for the National Aeronautics and Space Administration, according to one person.

If successful, Aerojet Rocketdyne’s bid would shake up a global rocket industry already reeling from the emergence of low-cost launches offered by entrepreneur Elon Musk’s Space Exploration Technologies Corp; aggressive marketing efforts by Europe’s Arianespace SA to sell bargain launches on Russian-built Soyuz rockets; and increasing indications that the U.S. Air Force eventually wants to purchase most of its satellite launches as a straight commercial service, rather than invest taxpayer dollars to develop a new generation of rockets.

All told, United Launch is expected to have to invest more than $2 billion through the beginning of the next decade to replace its current fleet of Atlas V and Delta IV launchers with a family of lower-cost rockets containing all domestic content. The venture, however, confronts congressional pressure to phase out use of Russian-built main engines on the Atlas V before then.

Meanwhile, United Launch faces eroding profits and reduced financial support from its parents, who have been unwilling to make long-term commitments to fund the new rocket, dubbed Vulcan.

Tory Bruno, United Launch’s chief executive, abruptly changed the complexion of the venture’s rocket development strategy last week by announcing an agreement with a startup company run by Inc. Chairman Jeff Bezos, to ramp up production of the BE-4 engine. Choosing between the BE-4, offered by Mr. Bezos, and a rival engine being developed by Aerojet Rocketdyne had been slated to occur in late 2016.

Mr. Bruno has been unwilling to comment on Aerojet Rocketdyne’s interest in United Launch, except to say on Twitter that he expects to “see a very bright future for ULA and for the future of space.”

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