Northrop Grumman’s purchase of Orbital ATK for $7.8 billion will create a company involved in projects ranging from America’s next stealth bomber and ballistic missile system to the International Space Station and the James Webb Space Telescope.
The deal, previewed in news reports over the weekend and announced today, is part of a trend toward greater consolidation in the defense and aerospace industry.
Virginia-based Orbital ATK itself was part of that trend back in 2014, when it was formed through the merger of Orbital Sciences Corp. and Alliant Techsystems’ aerospace and defense groups. More recently, United Technologies announced its $30 billion acquisition of Rockwell Collins, including the combination of the companies’ aerospace operations to create a new business unit.
In today’s announcement, the two companies said California-based Northrop Grumman would acquire Orbital ATK for about $7.8 billion in cash, and also assume $1.4 billion in net debt. Orbital’s shareholders would receive all-cash consideration of $134.50 per share.
The deal was approved by both companies’ boards of directors and is slated to close in the first half of 2018. However, it’s still subject to regulatory approval as well as a sign-off from Orbital’s shareholders. Orbital’s share price jumped above $132 after the deal was announced.
In a conference call with analysts, Northrop Grumman CEO Wes Bush said the two companies’ profiles were “very complementary.” Both companies have a long pedigree in defense and aerospace, with Northrop Grumman tending more toward defense and Orbital ATK focused on space.
Phil Larson, a former White House space adviser and SpaceX spokesman who’s now an assistant dean at the University of Colorado at Boulder, agreed that the pair-up “could be a good match.”
Here’s a sampling of the two companies’ projects:
- Prime contractor for the next-generation B-21 stealth bomber, a.k.a. Long Range Strike Bomber.
- Prime contractor for development of NASA’s James Webb Space Telescope, due for launch next year.
- Chosen by the Air Force, along with Boeing, to develop preliminary designs for a next-generation intercontinental ballistic missile system known as the Ground Based Strategic Deterrent. Orbital ATK is already one of Northrop Grumman’s partners on the project, along with Aerojet Rocketdyne. The shifting arrangement could raise competitive concerns.
- Parent company of Scaled Composites, which has been involved in the SpaceShipOne, SpaceShipTwo and Stratolaunch development efforts.
- Cargo supplier for the International Space Station, thanks to a multibillion-dollar contract with NASA for use of its Cygnus capsule and Antares rocket.
- Launch provider for NASA as well as defense and commercial projects, using its Pegasus air-launch system.
- Prime contractor for the solid-rocket boosters for NASA’s Space Launch System, due for its first test launch in 2019.
- Developer of the Next Generation Launcher, a concept under consideration by the Air Force for medium to heavy-lift rockets.
Assuming the deal goes through, Orbital ATK would become one of Northrop Grumman’s business sectors, contributing to what’s expected to be total sales in the range of $29.5 to $30 billion, based on current guidance.
Northrop Grumman’s prime U.S. rivals would include Boeing and Lockheed Martin as well as United Launch Alliance, a Boeing-Lockheed joint venture. The list of competitors arguably extends to billionaire-backed space efforts such as Elon Musk’s SpaceX, Jeff Bezos’ Blue Origin, Paul Allen’s Stratolaunch and Richard Branson’s Virgin Orbit.
Competitors can also be collaborators, however. For example, Stratolaunch relies on Northrop-owned Scaled Composites for construction of its giant launch airplane, and is teaming up with Orbital ATK as a rocket provider. Meanwhile, Boeing, Lockheed and Orbital ATK are all working together on NASA’s Space Launch System. Even Northrop Grumman is an SLS subcontractor.