L3Harris Technologies, Inc. (NYSE:LHX) has disclosed a significant transaction involving its Space Propulsion and Power Systems segment. On Monday, the company announced an agreement to transfer a controlling interest of this key business unit to AE Industrial Partners, a private equity firm specialized in aerospace and national security sectors.
The divestiture encompasses assets tied to propulsion, power, avionics, and nuclear technologies operating across five locations in the United States. Notably, AE Industrial Partners plans to reinstate the Rocketdyne name for the acquired business, a nod to its historic contributions to U.S. space and defense efforts.
Details of the Sale
The transaction sets the valuation of the Space Propulsion and Power Systems unit at approximately $845 million. Under the terms, L3Harris will maintain a sizeable minority stake, retaining close to 40% ownership of the business. It is important to highlight that the RS-25 rocket engine segment remains under the full ownership of L3Harris and is excluded from this deal.
Both parties have indicated the deal is anticipated to close in the latter half of 2026, contingent upon meeting standard closing conditions and receiving regulatory approval.
Strategic Importance and Future Plans
The assets involved in this sale are integral to producing upper-stage rocket engines deployed across national security, civil, and commercial space missions. Additionally, the business covers in-space propulsion and power supply technologies that are vital to ongoing space operations.
AE Industrial Partners has announced intentions to modernize manufacturing processes within the business to preserve and enhance critical capabilities. This approach aims to support maintaining U.S. leadership in the aerospace domain.
Kirk Konert, managing partner at AE Industrial, described Rocketdyne as "the birthplace of U.S. rocket propulsion," emphasizing their plan to introduce contemporary manufacturing disciplines to established and proven product designs.
From L3Harris’ perspective, CEO Christopher Kubasik has emphasized that this transaction repositions the company to align more closely with Department of Defense priorities while continuing to generate shareholder value.
Market Response and Stock Performance
Following the announcement, shares of L3Harris Technologies experienced an increase, trading 1.90% higher at $310.26 at the time of the announcement. Data reflect the stock reaching a new 52-week high.
Summary
Overall, the agreement represents a noteworthy shift in operational control for a prominent U.S. propulsion provider, transferring majority ownership to an investment firm focused on aerospace innovation and security technologies. L3Harris’ decision to retain a substantial minority interest indicates continued confidence in the future prospects of the business unit while streamlining its alignment with defense-related priorities.
Key Points
- L3Harris is transferring controlling interest in its Space Propulsion and Power Systems segment to AE Industrial Partners, with a valuation close to $845 million.
- The sale includes assets related to propulsion, power, avionics, and nuclear technologies across five U.S. locations but excludes the RS-25 rocket engine business.
- L3Harris will hold approximately a 40% ownership stake post-transaction, which is expected to complete in the second half of 2026 subject to approvals.
- AE Industrial plans to restore the Rocketdyne name and modernize manufacturing to strengthen U.S. leadership in space and defense propulsion technologies.
Risks and Uncertainties
- The completion of the transaction depends on customary closing conditions and regulatory approvals, which could cause delays or modifications.
- Integrating modernization efforts in manufacturing while preserving critical capabilities presents operational risks.
- The retention of only a minority stake by L3Harris may alter its influence over strategic decisions within the business unit.
- Market reactions to the restructuring could affect shareholder sentiment and stock price volatility in the near term.