LMT Lockheed Martin Corp

By Andy Pasztor 

Aerojet Rocketdyne Holdings Inc.'s $2 billion offer for the Pentagon's premier rocket-making venture collapsed Wednesday, with Boeing Co. announcing it wasn't interested in selling its stake and never took the bid seriously.

Starting in August, rocket-engine maker Aerojet Rocketdyne had quietly pursued United Launch, a 50-50 joint venture between Boeing and Lockheed Martin Corp., which the U.S. military and spy agencies currently rely on to launch nearly all of their satellites.

After word of the unsolicited bid leaked out last week-- roiling the global satellite-launch market and raising a multitude of questions among Pentagon brass--Lockheed Martin was leaning toward divesting its stake, according to people familiar with the discussions.

But on Wednesday, in a stinging rejection of Aerojet's move, senior Boeing space and defense officials took the unusual step of publicly saying they didn't even consider the offer worthy of detailed negotiations or analysis.

It was "not something we seriously entertained," according to Boeing spokesman Todd Blecher. On the sidelines of an industry-government conference in suburban Washington, D.C., on Wednesday, Chris Chadwick, head of Boeing's sprawling defense operations, reiterated to reporters that Boeing didn't give the bid any serious consideration, wasn't looking for other offers and was committed to the joint venture. Boeing and Lockheed Martin together invested an estimated $4 billion to develop the families of Atlas V and Delta IV rockets that formed the backbone of the joint venture created with the Pentagon's blessing roughly a decade ago.

Lockheed Martin has declined to comment on the matter, but industry officials previously said members of its executive suite were leaning toward selling assets of the joint venture as part of a broader, companywide portfolio reshaping. When the partners formally rejected the bid earlier this week, however, both delivered the same unequivocal message and rejected further discussions, according to one person familiar with the details.

Aerojet Rocketdyne's first statement after days of intense, behind-the-scenes maneuvering and discussions with Air Force officials shed little light on what happened. A spokesman said the company "routinely evaluates" possible acquisitions but "won't comment on potential business combinations until such a point [as] there is a definitive agreement in place."

Before the rejection, Aerojet Rocketdyne representatives weren't offered access to the joint venture's books as part of typical due diligence, according to several people familiar with the details.

For Boeing and Lockheed Martin, which have balked at making long-term commitments to develop a new generation of rockets for the venture, major financial challenges remain. Amid the Pentagon's shrinking satellite-launch business and escalating competition from lower-cost rocket providers, the partners confront decisions about further cuts to the venture's overhead.

The number of launchpads used by the venture is being reduced, and industrial partners are being asked to shoulder more investment in next-generation hardware. Against this backdrop, the venture's management is scrambling to adjust personnel levels and institute procedural changes to speed up assembly of rocket stages before liftoff.

More important, United Launch's fate over the next decade relies on a risky strategy: sharply increasing its share of commercial and nonmilitary government launches.

Doug Cameron contributed to this article.

Write to Doug Cameron at doug.cameron@wsj.com

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(END) Dow Jones Newswires

September 16, 2015 18:21 ET (22:21 GMT)

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