American aerospace and defense giant Lockheed Martin (LMT, Financial) recently announced its plans of acquiring the satellite wing of Astrotech Corp. (ASTC, Financial), Astrotech Space Operations. Lockheed expects to close the deal by the third quarter of the current year. After the deal closes, Astrotech Space Operations would become the wholly owned subsidiary of Lockheed Martin and would operate under the company’s Space Systems business segment.
The Deal
According to Astrotech, Lockheed Martin has made an acquisition proposal worth $61 million. But the Maryland-based company has not yet mentioned details regarding the pricing of the deal in the press release. Astrotech’s headquarter is in Titusville, Florida. Its division Astrotech Space Operations’ know-how lies in the area of “final stages of launch preparation”, which would help balance Lockheed Martin’s expertise in launching solutions with value added services, and satellite designs. Astrotech Space Operations offers launch services to commercial and government satellite, covering close to 90% of the satellite market in the U.S.
The company already has huge presence in this space with vast satellite operations, in comparison to the operations of Astrotech. But there definitely lies a good reason why Lockheed selected to acquire Astrotech, given that the company is extremely particular about businesses that it plans to takeover. In the press release Lockheed Martin mentioned that the acquisition proposal is subject to Astrotech shareholders approval.
Once that is done, the deal would close and Astrotech would become part of the aeronautics giant. Astrotech Space Operations’ top bosses are quite positive about the deal, which is evident from the statement the company’s Senior VP Don White made saying “joining Lockheed Martin will benefit our customers and our employees.” Following the announcement of Lockheed’s intension to buy the assets of the company, shares of Astrotech jumped from $2.25 to $4.59 intraday. The proceeds from the transaction would be used by the company to invest in growth areas such as developing the product line of detect mass spectrometer.
Growing Competition
The aerospace sector is increasingly becoming competitive. The acquisition proposal comes at a time when another Dulles-based industry player Orbital Sciences (ORB, Financial) plans to combine with the defense segment of Alliant Techsystems’ (ATK, Financial) and emerge as a stronger new entity named Orbital ATK. The defense space has been vastly dominated by the United Launch Alliance, which is a joint venture between Chicago-based aircraft major Boeing (BA, Financial) and Lockheed Martin. However, after the $5 billion merger deal to form Orbital ATK is complete, the industry will grow more competitive.
The Astrotech deal would not add much in terms of revenue or profits to the company’s financials, but it definitely portrays Lockheed’s focus on developing its space operations.
Departing Thoughts
The acquisition is a tiny move made by Lockheed to strengthen its space operations, but from the point of view of Astrotech, the deal looks like a good one for its shareholders. Even Lockheed’s space operations would get good support and streamline further. There have been worries regarding the cut in the U.S. defense budget in the recent past, but there’s no stopping Lockheed’s shares that rose more than 50% in the last one year. Overall, the deal might be a small one, but it looks like a well thought out move.
