August 15, 2024
Lockheed Martin’s $450M Acquisition of Terran Orbital
By Prisha Agarwal
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Overview of the deal
Implied Equity Value: $51.2 million
Total Transaction Size: $450 million
Date Announced: August 15, 2024
Closed Date: October 30, 2024
Target Advisor: Jefferies LLC (Financial), Akin Gump Strauss Hauer & Feld LLP (Legal)
Acquirer Advisor: Citigroup (Financial), Hogan Lovells (Legal)
In a strategic move to expand its satellite capabilities, Lockheed Martin, one of the world’s
largest aerospace and defense contractors, announced its acquisition of Terran Orbital. This move
strengthens Lockheed’s space capabilities in the aerospace and defense industry. The $450
million acquisition, done for $0.25 per share, retires Terran’s existing debt and additionally
provides for a new $30 million working capital facility for both current Lockheed and Terran
creditors.
The acquisition of Terran Orbital brings Lockheed Martin increased space manufacturing
capabilities through high throughput, robotic manufacturing capacities and high-performing
modular space vehicle designs. Combined with Lockheed Martin’s existing innovation
capabilities, this acquisition will provide greater value satellites for customers. Lockheed has
previously worked with Terran before and has utilized its products for both the US Space
Development Agency’s Transport and Tracking Layer programs. This acquisition also positions
Lockheed to remain competitive and gain a larger market share in the fast-growing space
exploration industry.
"Their [Terran Orbital’s] capabilities, talent and business momentum align with Lockheed Martin Space's strategic plans – and we're looking forward to welcoming them to our team. Our customers require advanced technology and even faster product development, and that's what we can achieve together." – Robert Lightfoot, President of Lockheed Martin Space
Company Details (Acquirer – Lockheed Martin)
Lockheed Martin is one of the world’s largest security and aerospace companies, specializing in
the research, development, and manufacture of technology systems, products, and services. The
company has four distinct departments of Aeronautics, Missiles and Fire Control, Rotary and
Mission Systems, and Space. Lockheed Martin primarily serves the U.S. government, as well as
select foreign military sales as contracted by the American military.
Founded in 1912, headquartered in Bethesda, Maryland.
CEO: Mr. James D. Taiclet Jr.
Number of Employees: ~122,000
Market Cap: $125,488.8 million
LTM Revenue: $71,295 million
LTM EBITDA: $10,226 million
LTM EV/Revenue: 2.0
LTM EV/EBITDA: 13.4
Company Details (Target – Terran Orbital)
Terran Orbital specializes in the manufacture and sale of aerospace and defense satellites in the
United States and internationally. As an end-to-end provider, it facilitates not only the design of
satellites but also their operation and provision of information through Terran technologies. Prior
to acquisition, the majority of Terran contracts were with Lockheed Martin and the two firms
collaborated frequently on projects.
Founded in 2013, headquartered in Boca Raton, Florida.
CEO: Mr. Marc H. Bell
Number of Employees: ~660
Market Cap: $51.2 million
LTM Revenue: $133.1 million
LTM EBITDA: ($96.7 million)
LTM EV/Revenue: 1.8
LTM EV/EBITDA: (2.74)
Projections and Assumptions
Short-term Consequences
This acquisition enables Lockheed Martin to provide its customers, such as the US government,
with enhanced satellite products at a lower production cost, potentially increasing federal
surveillance and defense capabilities. Terran’s unique customizable spacecraft platforms,
combined with Lockheed Martin's mission system integration and payload expertise, results in a
greater range of space technology possibilities and more efficient manufacturing.
Terran Orbital will remain a subsidiary of Lockheed Martin and will be recognized as Terran
Orbital, a Lockheed Martin company. This means that the firm will continue to operate as before
as an industry supplier, preserving much of the company’s existing workforce. Terran Orbital
may experience changes in its satellite design and manufacturing teams, however, as it integrates
these operations with Lockheed Martin’s existing, much larger Space department.
Market reaction that might already have taken place since its announcement: Following
Lockheed Martin’s announcement of a bid to acquire Terran Orbital in March 2024, Terran’s
stock rose from $1.10 to $1.29. In August 2024, following the announcement of a definitive
agreement to purchase all Terran shares at $0.25 a share, Terran stocks stabilized at $0.25. This
deal is dilutive for Lockheed Martin, with a seller’s yield of -0.26 and a weighted cost of
acquisition of 0.04. The resulting decrease in earnings per share may harm Lockheed’s valuation
in the short term but should be recovered following the realization of Terran’s full production
capabilities.
Long-term Upsides
Terran’s expanded space capabilities enable Lockheed to take advantage of the rapidly evolving
and growing space exploration industry. This presents new opportunities to further partner with
government agencies such as the Department of Defense, NASA, and Space Development
Agency. These organizations will pose increasingly complex mission requirements, from low
Earth orbit to interstellar operations, that Lockheed Martin will be able to fulfill with Terran’s
end-to-end satellite-based offerings. Additionally, with the purchase of Terran, Lockheed is
expanding its market share in the rapidly developing space industry, poising it for future growth.
The increased manufacturing capabilities of Lockheed in the long-term will create more
pollution that can impact the environment. Additionally, increased space operations will lead to
greater amounts of space debris – human made objects in orbit that are no longer in use. Space
debris not only poses environmental risks but asset risks to Lockheed’s partners, as debris
collisions and impacts can harm low Earth orbit spacecraft. However, this issue is recognized by
Lockheed’s partners, namely NASA, who are developing strategies to mitigate this risk.
Risks and Uncertainties
The transaction was closed on October 20, 2024, having passed all regulatory and legal
requirements. Lockheed Martin now faces the task of successfully integrating and implementing
Terran’s technologies and capital in its current infrastructure. Terran may additionally pose
financial risks for Lockheed; the type of satellite development Terran specializes in is capital-
intensive and expensive. In Terran’s Q2 2024 filing, the company reported $14.6 million in cash,
compared to around $300 million in debt. Ensuring that such financial troubles do not follow
Terran into this partnership will be Lockheed’s utmost priority.
In terms of industry prospects, the space industry can be highly volatile when it comes to the
discovery of new technologies and new exploration prospects. If Terran Orbital’s advanced
satellite capabilities are not able to meet partner demands for advanced RADAR and similar
technologies, the deal may prove to be unsuccessful for Lockheed. Similarly, seeing as Terran
will remain a commercial merchant supplier to the industry, certain technologies will not remain
in the Lockheed Martin company, dissolving its competitive edge. As a result, Lockheed will
need to continue to invest in private innovation within Terran to take full advantage of its
advanced robotic manufacturing and modular space vehicle designs.
Sources
https://www.sec.gov/Archives/edgar/data/936468/000093646824000019/exhibit997.htm
https://d18rn0p25nwr6d.cloudfront.net/CIK-0001835512/7fc90d07-681e-439f-902f-
67b69319a4d4.pdf
https://www.capitaliq.com/CIQDotNet/company.aspx?companyId=308120199
https://news.lockheedmartin.com/2024-08-15-Lockheed-Martin-to-Acquire-Terran-Orbital
https://news.lockheedmartin.com/2024-10-30-Lockheed-Martin-Advances-Space-Capabilities-
through-Strategic-Terran-Orbital-Acquisition
https://www.cnbc.com/2024/08/15/lockheed-martin-take-terran-orbital-private.html
https://www.nasa.gov/headquarters/library/find/bibliographies/space-debris/