Aerojet Rocketdyne [NYSE:AJRD] has recently held meaningful discussions with a couple of strategic suitors regarding a deal, according to two sources familiar with the matter.
The discussions were early stage and a transaction is not imminent, the first source said. “Aerojet has a fresh board open to all opportunities,” this source added.
The aerospace and defense company remains an attractive takeover candidate, as this news service has previously reported, since its USD 4.4bn merger with Lockheed Martin [NYSE:LMT] was abandoned on 13 February amid antitrust concerns.
A contentious boardroom battle between then Executive Chairman Warren Lichtenstein and CEO Eileen Drake ended in June with Drake winning the support of shareholders, a process that complicated the possibility of any meaningful deal talks.
With a new board seated in July, there is no rush to move quickly, the first source explained. The board recognizes it has options and strategic interest, and is aware of shareholder angst amid a disappointing second quarter that missed on both earnings and revenue.
The Federal Trade Commission thwarted the vertical merger with Lockheed, which is leading Aerojet to evaluate horizontal deals, said the second source.
This second source highlighted that Elliott Management, which disclosed a 3.7% stake in Aerojet in its most recent 13F filing, is also a large shareholder in Howmet Aerospace [NYSE:HWM]. Spun off from Arconic [NYSE: ARNC] in April 2020, Elliott holds 41.7 million shares of Howmet, or a 9.8% stake.
Elliott and Aerojet have yet to engage, one of the two sources and a third source familiar said.
Howmet provides advanced engineered solutions for the global aerospace and transportation industries.
Most of Howmet’s business is in commercial air, but 19% of their business is with the Department of Defense, said the first source. They are involved in the F-35 fighter jet, the most advanced fighter jet in the world, this source added.
This first source said Aerojet would be a very good strategic fit for Howmet. “Importantly, a deal with Howmet would not likely trip antitrust concerns, which does eliminate a number of potentially interest suitors. They [also] have a pristine balance sheet.” Howmet did not respond to a request for comment.
GE Aerospace, soon to be one of three divisions spun off from General Electric [NYSE:GE], could be a fit for Aerojet, said an industry executive.
The second source highlighted that Amy Gowder, who was appointed President and CEO of Military Systems Operation and GE Aviation in May 2022, was previously with Aerojet.
While at Aerojet, Gowder served as chief operation officer for Aerojet, leading the engineering, operations, manufacturing, supply chain, quality & mission assurance, safety, health & environment, and information technology organization.
GE Aerospace, which will include the aviation unit, is scheduled to become a stand-alone business in 2024. GE did not respond to requests for comment.
A sector advisor said defense and government services company Leidos [NYSE:LDOS] could make sense as a potential buyer for Aerojet. He noted Leidos doesn't have as large of a presence in missiles as other traditional defense giants so it may not see too much pushback from regulators.
The sector advisor added Leidos has been trying to build a presence in hypersonics, so an acquisition of Aerojet could be a nice add-on to its USD 1.65bn acquisition of defense engineering company Dynetics in 2020. Leidos declined to comment.
Aerojet and Elliott declined to comment.
