WASHINGTON ― Though regulators sought to block Lockheed Martin’s bid to acquire Aerojet Rocketdyne last year, they are far more likely to let the propulsion firm’s proposed deal with prime contractor L3Harris Technologies go through, experts said Monday.

The deal, if approved, would see the country’s only independent solid rocket motor maker bought by the sixth-largest American defense firm, L3Harris, in a deal valued at $4.7 billion. Pending government approvals, the deal is expected to close in 2023.

The U.S. Federal Trade Commission filed a lawsuit in January to block Lockheed’s $4.4 billion takeover of Aerojet because the FTC opposed the prospect of the vertical consolidation. But the newly proposed combination would be horizontal, with no material competitive overlaps, according to former deputy undersecretary of defense for industrial affairs Jeff Bialos.

“This will have a considerably easier time than the Lockheed-Aerojet deal,” said Bialos, now co-chair of global law firm Eversheds-Sutherland’s aerospace, defense and security group.

Though Lockheed said it would have allowed Aerojet to continue as a merchant supplier of propulsion equipment to the entire industry, the FTC’s complaint against the deal alleged Lockheed had previously tried to sway Aerojet against selling its wares to rival firms.

Bialos, who has previously represented both L3Harris and Aerojet, said L3Harris should be helped by its track record as a merchant supplier of various technologies.

“It remains to be seen whether the regulatory agencies would give much cognizance to that, but I think the Defense Department would take that seriously because the history is there,” Bialos said. “According to the FTC, there was no merchant supplier mentality at Lockheed.”

L3Harris is banking that regulators will approve the deal, according to the public terms. If the government is not satisfied by the deal and it’s scuttled, L3Harris would have to pay Aerojet a $406 million “reverse-breakup” fee.

“They are making a bet,” Bialos said of L3Harris.

The two companies, in their announcement, say the deal offers the country a “strengthened merchant supplier.”

“We’ve heard the Defense Department leadership loud and clear: they want high-quality, innovative and cost-effective solutions to meet both current and emerging threats, and they’re relying upon a strong, competitive industrial base to deliver those solutions,” L3Harris Chairman and CEO Chris Kubasik said in the statement.

A key opponent of the Lockheed’s takeover bid, Massachusetts Democratic Sen. Elizabeth Warren, said she would be scrutinizing Aerojet’s new plans to be acquired.

“Further corporate consolidation in the American defense industry raises both antitrust issues and national security concerns. As a Senate Armed Services Committee member, I opposed Aerojet’s previous failed deal and continue to closely monitor antitrust enforcement against defense contractors,” Warren said in a statement.

The antitrust advocacy group American Economic Liberties Project on Monday equated the new deal to the Lockheed deal, saying it would be unwelcome consolidation.

“It’s a case of deja vu,” the group’s national security director, Lucas Kunce, said in a news release. “Antitrust enforcers did the right thing last time, blocking an acquisition of Aerojet by a major prime contractor, and they should do it again. To create the competition that the warfighter and the taxpayer desperately need, we should be talking about break-ups, not acquisitions.”

The Biden administration has indicated that it would subject mergers to a “heightened review” in a report that came out earlier this year, so this deal will likely be carefully screened, according to Cynthia Cook, of the defense-industrial initiatives group at the Center for Strategic and International Studies.

“That said, every deal is different,” Cook said. “This merger should not trigger the same concerns as the failed Lockheed Martin takeover, as this looks more like a move toward increased diversification for L3Harris rather than one representing increased consolidation for a particular sector.”

L3Harris would gain a rocket motor supplier amid an “explosion in missile production demand,” driven by aid to Ukraine’s fight to repel Russia, U.S. arms transfers to NATO allies and Taiwan, and increases in Army, Navy and Air Force spending on long-range fires in a potential China fight, analyst Jim McAleese, of McAleese and Associates, said in a note Monday.

The transaction would further L3Harris’s efforts to “enter adjacent markets in big bites,” while letting Aerojet stay mostly intact and gain access to capital for future opportunities, according to Brett Lambert, a former Pentagon industrial policy official in the Obama administration, now with the Densmore Group consultancy firm.

Those capitol opportunities come as as Aerojet is facing a more competitive landscape, with several startups ― X-Bow Systems, Estes Energetics, Firehawk Aerospace and Adranos ― entering its corner of the market, said analyst Byron Callan of Capital Alpha Partners.

For Wall Street, it’s an open question whether L3Harris will be able to sustain its profit margins and invest at a level that will allow Aerojet to stay ahead of new players, Callan said.

Cowen Washington Research Group’s Roman Schweizer and Gautam Khanna said in a note to investors Monday they “expect a thorough but quick FTC review” and “expect approval but concede the current FTC is anti-consolidation.”

Ahead of the Pentagon’s budget release next year, Cowen forecasts Russia’s invasion of Ukraine will drive a 46% increase in Pentagon spending across more than two dozen major weapons and munitions programs through 2027. Nine contain rocket motor content from Aerojet, a key component and rocket motor supplier to Boeing, Lockheed Martin and Raytheon ― which helps make Aerojet an attractive purchase.

“Aerojet has key [intellectual property] and manufacturing capabilities for solid- and liquid-fueled rocket for space launch, hypersonics, missile defense and strike weapons (all of which we believe will grow equal/better than DoD’s top line),” Schweizer and Khanna said.

Joe Gould was the senior Pentagon reporter for Defense News, covering the intersection of national security policy, politics and the defense industry. He had previously served as Congress reporter.

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