By: Zack Duvall
In a move that surprised both defense industry analysts and investors, Northrop Grumman announced on Monday that it was purchasing missile defense and space industry leader, Orbital ATK inc.
According to financial documents, the final sale price is $7.8 billion in an all cash deal that gives Northrop access to numerous government defense contracts, including a contract Orbital has just secured to fly cargo runs to the International Space Station.
The move comes amidst rising global tensions as the Trump administration ramps up its pressure on various rogue regimes across the globe, including North Korea and Iran. Tensions, that Northrop president Wes Bush, referenced during a call with analysts about the deal.
“Clearly, as we watch what’s happening around the globe, the rather rapid advance of some of our potential adversaries is quite concerning .” Bush told analysts when asked about what set the deal in motion and started talks between the two corporations.
Northrop Grumman, a defense industry powerhouse and leader, greatly benefits from the acquisition because of Orbitals advanced and standard-setting work in the space industry, particularly with its “launcher” technology that was the missing piece for Northrop’s developing shuttle and space vehicle program.
The second immediate, and rather substantial, benefit to Northrop as a result of the deal is not so much the volume of the contracts Orbital had in progress, but the value of the contracts including multiple deals with numerous government agencies, including NASA and the U.S. Army. A benefit not lost investors as Northrop and Orbital both saw increases in share prices as news of the deal was made public.
The deal with NASA alone is worth $3 billion dollars.
Analysts cite that while tensions with Iran and North Korea highlight the need for American defense companies to improve and maintain innovation in U.S. domestic defense technology, this deal is an effort to stay ahead of Russia and China.
Both nations currently have space programs that are developing at alarming rates and if unchecked could surpass America’s capability and posture in the future of space exploration and settlement. As well as any potential attempt to weaponize space platforms that could prove game-changing in any future geo-political conflicts.
The deal has final reviews by government officials currently underway, but is expected to be finalized by early October.