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Aerojet Rocketdyne ULA?

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This seems like a really weird story:

Rocket engine maker Aerojet Rocketdyne has offered to buy launch services provider United Launch Alliance from Lockheed Martin and Boeing for at least $2 billion, an industry source told SpaceNews Sept. 8.

The unsolicited bid is the latest twist in what has been a topsy-turvy year for ULA, the primary U.S. government launch services provider.

First, this begs the question of whether the parents would be willing to sell. I’m not sure they’d want to give up control, given the strategic issues involved. An unfettered ULA could be almost as disruptive to their government business (particularly SLS) as SpaceX has been.

Of course, a purchase by AJR would probably pretty effectively fetter them in other ways. The only reason for the company to do this is pure desperation. If Tory gets his way, and they build Vulcan/ACES, and end Atlas, Delta and Centaur, and phase out use of the RL-10 as well (which they’ve been wanting to do for years), AJR is pretty much out of business. But it would be acquiring and preserving launch systems that are already known to be uncompetitive on the future market, and it still needs money to build the AR-1, the RD-180 replacement. Congress seems willing to throw them money for that. But the problem is, even if the taxpayer pays for development, the vehicle itself will remain uncompetitive against SpaceX, since even with the development subsidy, manufacturing costs will be higher than the current price for the RD-180 from Russia.

Which makes this story at Engadget pretty funny:

United Launch Alliance is a joint-venture between Lockheed Martin and Boeing that launches spy and navigation satellites for the Pentagon and Air Force. Now, the firm is the subject of a $2 billion bid from engine business Aerojet Rocketdyne, a company that’s been snubbed in its attempts to power the Atlas V. If the government’s shadowy army of intelligence analysts and accountants approve the deal, it could create a new aerospace behemoth that could leave Elon Musk shivering out in the cold.

Say what? If I were Elon, I’d be cheering this on, for reasons stated above. What I’d be worried about would be a counteroffer from Bezos, because this deal leaves Blue Origin out in the cold, in terms of suddenly having to develop their own rocket for the BE-4. I’ll bet he’s thinking about it. Of course, as I said above, this all presumes that Boeing and Lockmart are willing to sell. It was reportedly an unsolicited bid.

[Update a few minutes later]

Yes, as noted in comments, it’s a third higher than their market cap. And it’s just an opening bid, no way they’d get it for that price. It might be possible to do some kind of mezzanine M&A deal, but it sure looks like a bad bet to me.

[Mid-afternoon update]

12 thoughts on “Aerojet Rocketdyne ULA?”

  2. The profit from getting defense launch revenue need only last _long enough_ for a deal to seem attractive in conventional business timelines.

    And yes, Elon might be happy if it knocks off ULA’s attempts at innovations, while leaving Blue back to being entirely dependent on Bezos’ $. (There are a lot of them there…)

    1. “The profit from getting defense launch revenue need only last _long enough_ for a deal to seem attractive in conventional business timelines.”

      Are you talking about Orbital ATK?

  3. As far as I can tell, Blue has intended to continue development of their own reusable first stage booster in addition to selling the BE-4 engine to ULA. (See bottom of the page at http://www.blueorigin.com/technology.) I assume there was some agreement between ULA and Blue about this. For example, perhaps Blue’s orbital launch system would target a lower payload range that doesn’t compete with the Vulcan’s primary market. It could also focus on human space flight with a crew module that derives from the New Shepard system.

  4. I’m trying to understand this proposal from AJR’s side. They currently sell the engines for the Delta IV and the RL-10s used on both boosters to ULA. While I don’t know the numbers, I’d wager there’s a pretty hefty markup on those engines since the contracts are cost-plus. If they’re “selling” them to themselves, they can forgo the markup to lower the costs. I have no idea how much they could lower the costs but it could be a significant amount.

    If AJR does buy ULA, they’d likely shelve the plans on retiring the Delta IV (except the Heavy) until they find a way to increase the capacity of the Atlas. How much of the extra cost of a Delta IV is the markup AJR puts on each of the engines it sells to ULA? Cutting that markup could make the Delta IV more competitive. It’ll be years before the Falcon Heavy is certified by the Air Force, so ULA will still have a monopoly on the government payloads that are too heavy for a Falcon 9 to carry. There are quite a few of those payloads.

    The RL-10s are quite reliable but very expensive. If AJR takes over ULA, you can forget any idea of using an XCOR or BO engine for a new upper stage. Could they lower the cost of building RL-10s? From what I’ve read, they’re largely hand-built using 1960s technology. Perhaps there’s a way to add more automation to the production process. With cost-plus contracts, there was never an incentive to lower the costs. With competitive pressure, there will be substantial pressure to make things more cost effective.

    1. It’ll be years before the Falcon Heavy is certified by the Air Force

      Based on what I’ve heard about the certification process, it could be certified as early as next year, if it flies in the spring as currently scheduled.

      1. I thought they had to have three flights under their belt before it could be certified. I don’t think they’ll have three flights done by the end of next year. Plus, we’re talking about the Air Force bureaucracy here. They aren’t exactly known for their speedy and efficient service.

          1. How many years did it take the Air Force to approve the Falcon 9 even after it had way more than 3 flights? Sure, they say they’ve learned a lot about how to improve the process but we’re still talking about Air Force bureaucrats here. I served in the Air Force (including at Space Command) for many years and was a contractor supporting them for many more. I’ve seen how the sausage gets made. Perhaps you have not. I’m not knocking SpaceX in the least, just the Air Force. Until you’ve seen how royally screwed up they are up close and personal, you can’t even begin to appreciate how USAF stands for “yoU Sure Are F**ked.”

          3. I’m with Rand on this one.

            I don’t think they’ll have three flights done by the end of next year.

            Why not? SpaceX has four FH flights manifested and, except for the first one, they’re all paid launches. Once SpaceX has returned F9 to flight, FH goes from “deprioritized” to reprioritized and a considerable economic incentive exists to get the FH’s up.

            F9 return to flight is now said to be expected in November. That’s also right around the time the finishing touches should be applied to the refit of LC-39A at KSC. The first FH mission is set to launch from LC-39A. It seems entirely reasonable to expect the rest of the current FH manifest to do likewise.

            SpaceX has demonstrated the ability to turn around SLC-40 in as little as two weeks. Even if one assumes LC-39A will have a minimum turnaround time of two months – and there’s no real reason to make such an assumption – SpaceX could still get off four FH launches in 2016 even if they started as late as the end of June.

            How many years did it take the Air Force to approve the Falcon 9 even after it had way more than 3 flights?

            A little over one, actually. F9 v1.1 first flew in Sept. 2013. The third flight flew in Jan. 2014. The EELV certification process didn’t get underway in earnest until April 2014 and was completed by late May 2015. Elapsed time? Roughly 14 months.

            As Rand noted, the certification process is mainly about engineering and production processes. FH was designed by the same engineers and built in the same way in the same place on the same tools as F9. The only physical FH bits not shared with F9 are the cross-feed plumbing, the side booster nose caps and, one supposes, beefed up structural members in the interstage and second stage. The most significant difference between the two vehicles is probably in the GNC code for the core booster and the two side boosters.

            Given how much carries over from F9 to FH, and the fact that the USAF has now broken trail all the way to completion on the certification process, I wouldn’t be surprised if FH certification comes as little as 90 days after the third required FH mission. That could be well before the end of 2016.

  5. All that said, the question of how vertically integrated rocket manufacturers ought to be is an interesting one. If rocket engines aren’t commodities (and I don’t think they are), this sort of merger may well make sense in the abstract.

    You could lose a lot of overhead and hassle as a rocket designer if the engine guys were reporting to your boss instead of being a vendor.

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