Aerospace and defense technology company L3Harris (NYSE:LHX) announced the acquisition of Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD) for $58 a share. The all-cash deal valued AJRD at $4.7 billion, including the net debt.
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AJRD, which provides critical propulsion systems and energetics to the DoD (the U.S. Department of Defense) and NASA, will likely bolster LHX’s space and weapons offerings.
Speaking on the deal, LHX’s CEO and Chairman, Christopher E. Kubasik, said that the acquisition will enhance its business operations.
While Aerojet’s unique strategic assets and product lines in fast-growing areas are positives, Cowen & Co. analyst Gautam Khanna doesn’t see any material impact on LHX stock due to this deal.
Khanna added, “We like the industrial logic of LHX/AJRD (foray into weapons; potential to be a prime contractor in Space; etc.). We don’t expect a strong stock reaction on the back of this deal.” The analyst added that LHX’s focus shift on M&A activities to spur growth might not go down well with some investors, especially as organic growth is slowing.
LHX expects to fund the acquisition through its existing cash and new debt issuance. Moreover, the deal is expected to close in 2023. Post-acquisition, AJRD will operate as a new standalone segment. LHX expects the acquisition to be accretive to its adjusted EPS in the first year and improve its earnings visibility.
Is LHX a Buy?
LHX stock has received eight Buy and seven Hold recommendations for a Moderate Buy consensus rating on TipRanks. Meanwhile, analysts’ average price target of $272.33 implies 27.69% upside potential.
However, hedge funds sold 129.2K LHX stock last quarter. Further, it has a Neutral Smart Score of six on TipRanks.
