Wednesday, February 21, 2024

ULA on the verge of a deal that changes the space game: buyer gets to play SpaceX in the race for space dominance

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Last year’s news about the possible refusal of parent companies ULA Boeing and Lockheed Martin from the missile business caused a wide resonance. And last week General Director ULA Tory Bruno gave a presentation at the conference, at which slides were shown, as if taken from the presentation M&A (Mergers & Acquisitions, Mergers and Acquisitions).

Rocket Vulcan next generation United Launch Alliance, arrived at Miss Canaveral in Florida on 22 January 2023. Source: Joe Skipper, Reuters

In December it became known about three contenders for the purchase of ULA – space launch company Blue Origin Jeff Bezos, investment giant Cerberus and aerospace contractor Textron. However, since then there has been no information about leading offers or refusals from any potential buyers. Even the successful debut of the ULA Vulcan rocket in January did not affect the development of the situation.

ULA has been valued at $2 billion over the past decade, and experts believe a sale makes sense. However, the deal should have been closed much earlier, as SpaceX already dominates the world market and ousted ULA from among the leading suppliers to the US Army. Therefore, it is important to find a new owner who can simplify the structure of ULA and invest in innovations.

Initially the owners of ULA asked for more than $4 billion for the company, but the reasonable valuation of the sale is in the range of $2 billion to $2.5 billion. Competition in the market for heavy launch vehicles, including Vulcan, has increased over the past ten years, but only now is this rocket beginning to be used.

Textron expressed interest in purchasing ULA with the aim of expanding its systems business. Some experts warn that purchasing such a company could be a risky way to enter the space sector, even to compete with leading defense companies. However, considering that Textron also participated in the bidding for the company producing rocket engines Aerojet Rocketdyne, which was eventually sold to another company, such a deal would be the most significant acquisition for Textron at present.

Blue Origin has also expressed interest in purchasing ULA, but this deal has its own controversial sides. On the one hand, Blue Origin has existing relationships with ULA, but they are concentrated on other, not rocket-related projects, such as the launch of the New Glenn rocket. However, cooperation between these companies has its advantages, including the possibility of investment, stable relationships and employment of heavy startups in the market.

Cerberus is considered the most likely buyer of ULA, as private investors have the opportunity to optimize costs and management, as well as accelerate the development of Vulcan. Now there are also favorable conditions in the market for combining debt and equity offers. Furthermore, Cerberus has a reputation as a company that cooperates with governments and national security enterprises, and they approach acquiring companies in a disciplined manner. However, some experts doubt that the ownership of ULA Cerberus will allow it to achieve the innovations necessary to compete with SpaceX, especially with the entry on the market of the rocket Starship.

In the process of selling ULA, some experts note the possibility of the emergence of a surprise buyer, especially in light of the lack of visible progress since the launch of the Vulcan rocket. Applications, which depend on the successful debut of this rocket, should have been advanced much earlier, and the buyer, seeking financing, would probably have become more active in negotiations.

The fate of ULA remains unclear, but the possibility of the emergence of a suitable buyer represents great interest, especially considering the task that stands before the new owner — to compete with the giant SpaceX.

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