WASHINGTON ― Northrop Grumman won U.S. antitrust approval to complete its $7.8 billion acquistion of rocket maker Orbital ATK on June 5, and is expected to complete the transaction by market close today.
The Federal Trade Commission approved the deal on the condition the companies provide solid fuel rocket motors on a nondiscriminatory basis to competitors for missile contracts, resolving charges that the acquisition would be anticompetitive.
The FTC is requiring Northrop to create firewalls between its new business and the rest of the company to prevent it “from transferring or using any proprietary information that it receives from competing missile prime contractors or [solid rocket motor] suppliers in a manner that harms competition.” The firewall will be monitored by the Defense Department’s acquisition and sustainment branch.
Orbital ATK is one of two firms working on propulsion systems for two prime contractors, Boeing and Northrop, competing for the Air Force’s Ground Based Strategic Deterrent contract, which will replace the Minuteman III intercontinental ballistic missile. The FTC-mandated firewall was likely implemented with this competition in mind.
However there is precedent for a company to be involved in its competitors’ proposals. For instance, on the JSTARS recap program, all three prime contractors — Boeing, Northrop and Lockheed — submitted proposals featuring radar from Raytheon and Northrop.
Orbital ATK will operate as Northrop Grumman’s fourth business sector, named Northrop Grumman Innovation Systems. Northrop’s board of directors elected Blake Larson as president of the innovation business division. The new sector joins Northrop’s aerospace systems, mission systems and technology services businesses.
The $9.2 billion sale was announced on September 18, 2017. Northrop paid Orbital ATK $7.8 billion in the all cash deal, and assumed $1.4 billion in debt.
Northrop has updated its 2018 guidance, predicting sales to reach upwards of $30 billion.
In anticipation of the deal going through, Orbital has hired 1,000 more employees and invested a decent number of millions, tens of millions, in a number of our facilities to support readiness,” Mike Kahn, Orbital ATK’s defense group president, told Defense News in an April 10 interview at the Navy League’s Sea-Air-Space conference.
Orbital recently invested heavily in its Allegany Ballistics Laboratory in Rocket Center, West Virginia, where it builds rocket motors, warheads and fuses because it’s anticipating a “significant increase” stemming specifically from Army programs that are ramping up in the next few years, according to Kahn.
The deal will also allow Northrop to expand more into the space market, a key sales area of Orbital ATK where Northrop has historically lagged.