Northrup Grumman/Orbital ATK Deal Seen Raising Little Regulatory Concern
Northrup Grumman's proposed buy of Orbital ATK likely won't face significant regulatory challenges, space and satellite industry experts told us. The deal likely doesn't have big ramifications for the commercial space sector, largely reflecting consolidation in the defense contractor universe, they said.
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Grumman and ATK don't have much overlap, which would point to there not being need for divestment or other conditions on the deal, said satellite lawyer Jeff Carlisle. "This is really a strategic, bolt-on transaction" letting Grumman beef up its footprint in areas where it's not a significant player, and seems to be driven largely by the expectation of growth in the militarized space market, said Milbank satellite and aerospace lawyer Dara Panahy. He said ATK's takeover wouldn't affect the number of core satellite communications suppliers, and likely wouldn't raise any significant antitrust worries at the FTC.
ATK has four active radio services licenses through the FCC, shows the Universal Licensing System. Any ATK license transfer wouldn't be significant, and largely pro forma, Panahy said.
Grumman just a few years ago was seen as possibly being broken up because of business struggles but has gone through an effective turnaround, Panahy said. The ATK deal looks to be a way for it to reinforce itself as a major U.S. defense contractor "in the ilk of a Lockheed Martin or Boeing," he said. A Grumman/ATK call with analysts Monday largely involved defense sector issues.
The deal also might need FAA approval for ATK's launch licenses, depending how the deal is structured, said space lawyer Laura Montgomery, who formerly was with the agency. Montgomery said the post-merger entity would have to satisfy all the guidelines of a new launch applicant, demonstrating it will meet various FAA protocols. If ATK's launch business under Grumman operates largely the way it does now, with much the same personnel, that approval should be relatively easy, Montgomery said. She said if the combination results in a need to transfer the launch license, the FAA has 180 days in which to complete its review. Asked about regulatory reviews, Grumman didn't comment.
Grumman expects the $9.2 billion deal to close in the first half of 2018, it announced Monday. Grumman CEO Wes Bush in the analyst call said ATK was "a very complementary fit" with little overlap. Asked about any possible divestitures of ATK operations, Bush said Grumman "see[s] a lot of good fits" but it also would continue to look at its portfolio over time to see "what doesn't fit."
ATK CEO Dave Thompson said it would operate as a business sector within Grumman, with the deal letting it go after business opportunities beyond its current resources and finances. He also said there have been no final decisions made whether he would stay head of the ATK segment.