(By Balaseshan) Aerospace propulsion systems maker Gencorp Inc. (NYSE:GY) has agreed to pay $550 million for United Technologies Corp.'s (NYSE:UTX) Rocketdyne unit, currently part of Pratt & Whitney.
The deal proceeds would be used by United Tech to pay down a portion of the short-term debt incurred to finance the $16.5 billion acquisition of aircraft components maker Goodrich Corp. (NYSE:GR).
The transaction is expected to be accretive to GenCorp's earnings in the first year. The acquisition is anticipated to close in the first half of 2013.
Rocketdyne, the world's largest manufacturer of liquid-fueled rocket propulsion systems, has been facing an uncertain future after the end of the U.S. space shuttle program.
The purchase price of $550 million, which is subject to adjustment for working capital and other specified items, is expected to be financed by Gencorp with a combination of cash on hand and issuance of debt.
GenCorp Chief Executive Scott Seymour said the combined enterprise will be better positioned to compete in a dynamic, highly competitive marketplace, and provide more affordable products for its customers. In addition, this transaction almost doubles the size of the company and provides additional growth opportunities.
Rocketdyne, headquartered in Canoga Park, California, is a provider of high-value propulsion, power, energy and innovative system solutions used in a wide variety of government and commercial applications, including the main engines for the Atlas and Delta launch vehicles, missile defense systems and advanced hypersonic engines.
Citigroup Global Markets Inc. is acting as exclusive financial advisor to GenCorp for this transaction. In addition, Morgan Stanley Senior Funding LLC and Citigroup Global Markets Inc. are providing fully committed financing to support this transaction.
GY closed Friday's regular session at $6.75, while UTX ended at $74.23.