L3Harris to reply to FTC’s second request on Aerojet deal around June, CEO says

WASHINGTON — L3Harris expects to reply to the Federal Trade Commission’s second request for information on the company’s impending $4.7 billion acquisition of Aerojet Rocketdyne around June, Chairman and Chief Executive Officer Chris Kubasik said during the company’s first quarter earnings call today.

Kubasik said he anticipates Aerojet will comply with the request ahead of L3Harris, teeing up a decision on the deal by the FTC this summer and a potential close on the deal this year, should the FTC allow it to proceed.

“So we got the second request mid-March. So that would kind of suggest a June submission, both for us and I know Aerojet Rocketdyne is doing the same thing. I’m feeling they’ll probably submit a little earlier than us,” Kubasik told investors during the company’s earnings call that elsewhere showed L3Harris increased revenues and free cash flow but barely missed some analysts’ projections for earnings per share. An Aerojet spokesperson declined to comment for this report.

Once both companies fully comply with the second request, the FTC has 30 days to either sue to block the deal or let it stand. The agency can also extend the waiting period in cooperation with both companies in an effort to head off litigation, according to the FTC’s website.

As one of only two major suppliers of solid rocket motors for the Pentagon — the other being Northrop Grumman after its purchase of Orbital ATK — Aerojet’s sale has garnered scrutiny from the FTC, which formally asked both companies to provide greater detail last month on potential antitrust issues as it probes the impact of the deal on the broader marketplace. The regulatory body previously moved to block defense giant Lockheed Martin’s attempt to purchase Aerojet, citing concerns about unfair competition. The agency’s litigation prompted Lockheed to walk away from the deal in February of last year. 

Still, some industry observers have confidence the deal between L3Harris and Aerojet will go through. In a recent note to subscribers, analyst Byron Callan of Capital Alpha Partners wrote, “We still retain very high odds that the LHX-AJRD deal is completed,” referring to the two companies using their respective ticker symbols. 

Kubasik, who remarked that “I believe the worst is behind us” on supply chain constraints and inflationary pressures, said L3Harris is still evaluating what businesses the company will divest to free up cash to fund the Aerojet purchase. Though he did not say what may be sold off, he gave an indication of the direction L3Harris will take as a result. 

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“We’re not going to actually disclose what we’ve decided is non-core, but we have a regular process to review our portfolio and see as the company evolves, we’re becoming more and more of a government or defense contractor,” he said.

“So, you know we want things that align with the rest of the portfolio where we have synergies and the ability to share technologies and processes,” he added.