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Aerojet Rocketdyne Soars After Being Bought by Lockheed for $4.4 Billion

Shares of Aerojet Rocketdyne surge after Lockheed Martin announces it will acquire the defense industry supplier in a deal valued at $4.4 billion.

Shares of Aerojet Rocketdyne  (AJRD) - Get Aerojet Rocketdyne Holdings, Inc. Report surged on Monday after Lockheed Martin  (LMT) - Get Lockheed Martin Corporation Report said it agreed to acquire the defense industry supplier in a deal valued at $4.4 billion.

Aerojet Rocketdyne shares rocketed more than 22% in trading on Monday after Lockheed said it will pay $51 a share for each Aerojet Rocketdyne share, a 21% premium from Friday’s closing price.

As part of the transaction, Aerojet declared a $5 a share special dividend to be paid on March 24, to holders of record as of March 10, bringing the total received by Aerojet shareholders to $56 a share, according to a statement.

The transaction will give add Aerojet’s propulsion systems for missiles, rockets and other space and defense applications to Lockheed’s existing arsenal of defense products.

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“Acquiring Aerojet Rocketdyne will preserve and strengthen an essential component of the domestic defense industrial base,” Lockheed CEO Jim Taiclet said in the statement.

The deal follows in the footsteps of Lockheed competitor Raytheon Technologies  (RTX) - Get Raytheon Technologies Corporation Report, which last year combined with industrial conglomerate United Technologies in a $100 billion deal billed as a merger of equals.

The Aerojet transaction is expected to close in the second half of 2021 after getting regulatory approvals and a nod from Aerojet’s shareholders.

Lockheed, the world’s largest defense contractor, has been seeking opportunities to “bring in the technologies faster into the company that we think are going to be crucial for the future,” Taiclet said during the company’s October earnings call.

Shares of Aerojet were up 22.05% at $51.31 in trading on Monday, giving the El Segundo, California-based company a market value of $3.25 billion. Shares of Lockheed Martin were down 1.32% at $351.36.