At a specialized factory in Tucson, Raytheon makes missile “kill vehicles” that use maneuvering rocket units made by Aerojet Rocketdyne to smash enemy warheads in space.

 Courtesy of Raytheon

Tucson-based Raytheon Missiles & Defense is challenging a proposed sale of rocket-engine supplier Aerojet Rocketdyne to defense giant Lockheed Martin, contending the deal would stifle competition and threaten national security.

Lockheed says the proposed $4.4 billion deal announced in December would strengthen Aerojet — the primary U.S. supplier of rocket and missile propulsion systems — while reducing costs for taxpayers.

But Raytheon has objected to the acquisition in talks with regulators, saying it would reduce competition and undermine future innovation.

“Removing the defense industry’s last remaining independent propulsion provider from the market raises significant national security concerns for our company, other competitors and our customers,” Wes Kremer, president of Raytheon Missiles & Defense, said in a prepared statement. “We’re actively relaying these concerns to the Federal Trade Commission and Department of Defense.”

Raytheon’s Tucson operations, part of Raytheon Technologies Corp., produce many of the nation’s front-line weapon systems, and Aerojet is Raytheon Missiles & Defense’s largest single supplier with 70% of energetics and propulsion contracts.

Last year, Raytheon reached a $1 billion, five-year strategic agreement to buy propulsion systems from Aerojet for its Standard Missile series of naval and ballistic-missile interceptors.

University of Arizona librarians and friends Patricia Paylor and Phyllis Ball lived in what was called a round house. It was actually a hexagonal house designed by local architect Arthur T. Brown in the 1950s.

Raytheon is concerned that Lockheed’s control of Aerojet would limit its access to rocket motors and curtail innovation.

During a major investor conference in February, Raytheon Technologies CEO Greg Hayes said Raytheon would protest the deal, citing Aerojet’s importance as a key supplier.

“They are a huge supplier to us, and if that merger actually happens, you don’t have an independent supplier on the solid-rocket-motor side,” Hayes said. “And also, I think it gives us pause as we think about the competitive landscape going forward.”

The company is having ongoing conversations with the Pentagon and the FTC to make its case that the Aerojet deal will lessen competition as well as curtail innovation in the defense industry, Raytheon spokeswoman Heather Uberuaga said.

Not only does Aerojet make rocket motors for all the big defense contractors, it is the only company in the world that supplies a special maneuvering motor for the nation’s ballistic missile interceptors, Uberuaga noted.

Three industry teams — led by Lockheed, Boeing and Northrop Grumman, partnered with Raytheon — are vying to reach the next stage of a competition to build the Next Generation Interceptor for the Missile Defense Agency, and all three are using Aerojet’s Divert and Attitude Control System in their designs.

Lockheed Martin says it is committed to giving competitors access to Aerojet’s line of rocket motors. The company says it expects the deal to clear regulatory hurdles and be completed in the second half of 2021.

Lockheed CEO Jim Taiclet said in December that he expects regulators to require that Aerojet continue to supply rocket motors on an equal basis to Lockheed’s competitors, citing a similar condition placed on Northrop Grumman when it acquired solid-rocket motor supplier Orbital ATK in 2018.

A longtime defense-industry analyst said Raytheon’s concerns are understandable but predicted the deal will be approved by regulators.

“I think that the merger is going to be approved with conditions, such as that Lockheed must sell on a level playing field to anybody in the marketplace,” said Loren Thompson, chief operating officer of the nonprofit Lexington Institute.

Regulators also may require that Lockheed “firewall” Aerojet to prevent the disclosure of sensitive information about Lockheed’s competitors, said Thompson, who notes that Lockheed, Raytheon and all the other major defense contractors contribute to his think tank.

Thompson said that there is very little overlap in the products made by Lockheed and Aerojet to give regulators pause, while Aerojet needs Lockheed to survive.

“Aerojet is too small to survive as a standalone enterprise. It only has 5,000 employees and its product lines are risky,” he said.

Thompson said Northrop doesn’t have the standing to protest the Aerojet deal after making a similar deal itself in buying Orbital, and Boeing officials have said they don’t plan to oppose the sale.

But despite the conditions placed on the Northrop-Orbital deal, Boeing officials dropped out of a competition to build the nation’s next ground-based ICBM, saying Northrop’s ownership of Orbital gave it an unfair advantage. Northrop won the $13 billion contract to build the new missile last September as the lone bidder.

The Aerojet sale is just one of a several big merger deals in the defense industry in recent years, besides the Northrop-Orbital deal, including United Technologies Corp.’s merger with Raytheon Co. to form Raytheon Technologies last year, and combinations of General Dynamics and CSRA, L-3 Technologies and Harris Corp., and Lockheed Martin and Sikorsky.

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Contact senior reporter David Wichner at dwichner@tucson.com or 573-4181. On Twitter: @dwichner. On Facebook: Facebook.com/DailyStarBiz