Published Date : Jun 06, 2018
Approval to mergers in the U.S. defense and space sectors is likely to occupy a pivotal role in ensuring a fair competition in the sectors and benefit the national economy at large. The U.S. Department of Defense is deeply concerned about this, particularly in the solid rocket motors industry. Against this background, Northrop Grumman, a global security company and the U.S. defense contractor has received the U.S. Federal Trade Commission (FTC) nod on June 5, 2018 for acquiring defense and space contractor Orbital ATK for a value of $7.8 billion. The move to buy the solid rocket motors supplier was made back in September last year in which Northrop Grumman had bid for an all-cash deal amounting to $9.2 billion deal that also included $1.4 billion in debt.
Merger approved on Condition that Northrop fulfills Certain Requirements
The merger received the approval on the condition that the global security company can supply solid rocket motors to the competitors, prime contractors, under a specific clause stated by FTC that reads “on a non-discriminatory basis under specified circumstances.” The other condition put forth by antitrust regulator was that Northrop should separate its space rocket business with its other operations using a firewall; however, the onus of compliance with the firewall rests on the Defense Department.
Deal to help Northrop expand Technical and Financial Competencies
Both the companies were optimistic of the deal as the areas of intersection of their businesses are small. Furthermore, Northrop will gain access to several promising government contracts and the merger will allow it to expand its armamentarium of missile defense systems and space rockets. The move will also help it consolidate its technical expertise and financial resources.
Of note, the U.S. Air Force wanted to acquire a new intercontinental ballistic missile and it wants Orbital ATK along with Aerojet to supply the prime contractors, one of which is Northrop and the other is the Boeing Company.