How bankers read a potential ULA sale

United Launch Alliance’s next-generation Vulcan rocket is unloaded after it arrived by ship in Cape Canaveral, Florida, U.S. January 22, 2023. 

Joe Skipper | Reuters

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Overview: Understanding launch acquisition

You may have heard United Launch Alliance is for sale. 

It’s been widely reported over the last year that ULA parent companies Boeing and Lockheed Martin are considering offloading the rocket business. And last week ULA CEO Tory Bruno gave a conference presentation featuring slides that looked plucked straight from an M&A pitch deck.

Although we got word in December of the three bidders in the mix to buy ULA – Jeff Bezos’ space company Blue Origin, private equity giant Cerberus, and aerospace contractor Textron – there hasn’t been an update since on leading offers or any of the interested parties dropping out. That’s despite the successful debut of ULA’s Vulcan rocket in early January, which I assumed would galvanize a sale.

In the meantime, I’ve been curious to understand how ULA’s sale is likely to play out. I spoke to seven financiers who are familiar with the space industry, to wrangle some impartial consensus – not direct insight into the deal proceedings, but informed speculation to unpack the situation.

Boeing and Lockheed Martin are, and have been, looking to sell the rocket business for some time. Bids for ULA over the past decade have been in the $2 billion range, and the bankers I spoke to were unanimous in thinking a sale makes sense. 

But most contended that a deal should have been finalized years ago, as SpaceX now dominates the global rocket launch market and has grabbed share from ULA’s best customer, the U.S. military. The sticky part of a sale, those bankers said, is the need for new ownership that can both streamline ULA and invest in further innovation.

The price is another sticking point: Bankers suggested ULA’s owners initially sought more than $4 billion for the company, but the consensus of a reasonable winning bid was in the range of $2 billion to $2.5 billion. As one banker emphasized to me, there’s more competition among heavy launch vehicles like Vulcan today than there was a decade ago, and the rocket’s only just getting going now.

So which of the three buyers makes the most sense to come out the winner?

Textron’s interest was described as a perceived desire to acquire a major space asset and expand its systems business. Yet each person I spoke to added a caveat along the lines of “buying a launch company is a terrible way to get space exposure,” even to compete among the prime defense companies. Some pointed to reports that Textron had also bid for rocket propulsion company Aerojet Rocketdyne, which was ultimately sold to L3Harris. But at ULA’s estimated sale price, such a deal would mark Textron’s most significant acquisition in recent history. 

The bankers I polled characterized Blue Origin’s interest in ULA as a double-edged sword: It reads as the most synergistic of the three given their existing relationship, but it’s also expected to cannibalize the core business. After all, if Blue is making as much progress toward launching New Glenn as it’s shown off recently, why buy another heavy lift rocket in Vulcan that’s already bearing the fruits of years of labor? Moreover, ULA represents Blue’s best customer for its core BE-4 engines. Still, there are some perceived advantages to that potential tie-up: Blue Origin has the greatest ability of the suitors to inject fresh capital, it would gain established relationships and legacy reputation, and it would have one less competitor in the heavy launch market.

Cerberus is seen as the most sensical destination for ULA, with a private equity owner perceived as having the greatest ability to streamline costs and management while ramping up Vulcan’s cadence. Plus, the current macroenvironment seems fitting to pull off a debt and equity bid combo. Additionally, Cerberus has a reputation for liking government and national security businesses, and is regarded as disciplined when looking at acquisitions. But some bankers questioned whether the PE shop would drive the innovation needed to compete with SpaceX – contending that competing with Falcon 9 isn’t enough when Starship’s expected to enter the market in the years ahead.

Several folks I spoke to pointed out that a dark horse could still emerge in this process, especially since there hasn’t been visible development since Vulcan’s launch. Bids that were conditional on the rocket debuting successfully should have been moving forward already, and a buyer looking for financing would have likely made some noise when talking to banks in the time since.

The destiny of ULA may be uncertain, but the consensus I gathered was a strong desire to see a fitting buyer emerge. Regardless, ULA’s new ownership would then begin a new challenge: Taking on the SpaceX juggernaut.

What’s up

  • Sierra Space is preparing to IPO: The company confirmed preliminary plans for an initial public offering, with timing dependent on “when the market looks like it’ll give us the right credit for valuation,” CEO Tom Vice siad, adding that Sierra’s “been working for a year and a half to make sure that we are public company ready.” – Bloomberg
  • NASA’s JPL lays off 530 employee and 40 contractors, representing about 8% the center’s workforce due to lack of congressional funding. “These cuts are among the most challenging that we have had to make even as we have sought to reduce our spending in recent months,” JPL Director Laurie Leshin wrote in a note to employees. – JPL
  • Virgin Galactic and FAA reviewing alignment pin issue from the company’s most recent spaceflight, as the part detached from carrier aircraft VMS Eve after releasing the spacecraft. Virgin Galactic says the problem did not pose a safety risk to the crew or vehicles. The pin came loose from VMS Eve after releasing the spacecraft. – Virgin Galactic
  • SpaceX launches NASA’s $1 billion PACE satellite, with the climate-focused spacecraft flying to orbit on a Falcon 9 rocket from Florida and performing as expected. PACE, or “the Plankton, Aerosol, Climate, ocean Ecosystem satellite,” will look to study the oceans and atmosphere. – NASA
  • Sierra tests first DreamChaser spaceplane in Ohio at NASA’s Armstrong facility, with the reusable cargo spacecraft undergoing environmental testing in preparation for launch. – NASA
  • Lunar startup Interlune wants to mine helium-3 from the moon. The company, led by former Blue Origin executives, recently raised about $15 million and said it developed a “breakthrough extraction method” for He-3 from lunar regolith. – TechCrunch
  • Terran Orbital signs agreement with protesting shareholders group, which had been calling for changes to the company’s management structure. Part of the agreement is for Terran to fill a vacant seat on its board of directors. – Terran Orbital
  • Former CEO of ispace’s U.S. business Kyle Acierno sues company, alleging discrimination and harassment against non-Japanese workers. A second similar lawsuit was filed from the company’s former vice president of spacecraft development, Mohamed Ragab. – Supercluster
  • Blue Origin completes first BE-4 engine test firing in Alabama at the historic Test Stand 4670 of NASA’s Marshall center that the company upgraded and refurbished. – Blue Origin

Industry maneuvers

Market movers

Boldly going

  • Joseph Pelfrey named director of NASA’s Marshall center in Alabama, where he has served as acting center director since last year. – NASA
  • Arvind Srinivasan appointed CTO of Maxar Intelligence after 13 years at Google, where he oversaw the tech giant’s commercialization of the Google Maps Engine cloud platform. – Maxar Intelligence
  • Tim Solms named CEO of startup Slingshot Aerospace, a former tech executive who joins the company with prior experience at Microsoft, Dell and VMWare. Solms takes the place of co-founder Melanie Stricklan, who left the company last year. – Slingshot Aerospace
  • Jerry Welsh appointed to Finnish hyperspectral satellite company Kuva Space as a board member, and plans to lead the company’s U.S. subsidiary expansion. Welsh was formerly the CEO of ICEYE’s U.S. business. – Kuva
  • Mylène Pion Bosio appointed as vice president of sales and marketing for French startup Aldoria, coming to the space situational awareness company with experience from Eutelsat and Airbus. – Aldoria

On the horizon

  • Feb. 8: SpaceX Falcon 9 launches Starlink satellites from California.
  • Feb. 9: SpaceX Crew Dragon splashes down Ax-3 crew off the coast of Daytona, Florida.
  • Feb. 14: SpaceX Falcon 9 launches lunar IM-1 mission for Intuitive Machines from Florida.
  • Feb. 14: House Space and Aeronautics Subcommittee Hearing on the International Space Station and future of U.S. low Earth orbit space stations.
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