Lockheed Martin, a defense giant, has announced its acquisition of Terran Orbital, a struggling spacecraft manufacturer. The deal, valued at nearly $450 million, will see Lockheed take Terran private. This agreement comes after Lockheed’s previous bid of nearly $600 million in March. As part of the deal, Lockheed will acquire Terran Orbital’s outstanding common stock at 25 cents a share in cash and will also pay off Terran’s debt. To ensure Terran’s continued operations, Lockheed has established a $30 million capital facility.
The acquisition is expected to close in the fourth quarter and will help Terran avoid a cash and debt crisis. As of July, Terran’s cash reserves were less than $15 million, and the company reported approximately $300 million in debt. This deal will provide much-needed financial stability and support for Terran during this challenging period.
Terran Orbital, a small spacecraft maker, went public earlier this year through a special purpose acquisition company (SPAC) at a valuation of $1.8 billion. However, like many other space stocks, Terran has been adversely affected by the shifting risk environment in the market. The company has yet to turn a profit, contributing to its current struggles.
It is worth noting that Lockheed Martin is already a significant stakeholder in Terran Orbital. The defense giant invested during Terran’s SPAC process and again in late 2022. Lockheed Martin is not only acquiring Terran but also serves as a crucial customer, accounting for 70% of Terran’s revenue during the second quarter.
One of Terran’s significant contracts includes a spacecraft production agreement with Rivada Space Networks, a prospective satellite communications operator. This contract, valued at $2.4 billion for 300 satellites, was signed 18 months ago. However, it has yet to generate substantial funds for Terran. In the first half of this year, Terran reported recognizing just $6.2 million from the Rivada agreement. As a result, Terran has decided to remove the Rivada deal from its total contract backlog, reducing the backlog of orders from $2.7 billion to $312.7 million.
While the Rivada deal has not been as lucrative as expected, Terran’s non-Rivada contracts, primarily associated with Lockheed Martin, account for 91% of the company’s contracts. This highlights the importance of Lockheed Martin’s involvement in Terran’s operations.
In conclusion, Lockheed Martin’s acquisition of Terran Orbital will provide the struggling spacecraft manufacturer with much-needed financial support and stability. The deal will help Terran avoid a cash and debt crisis, ensuring its continued operations. Despite facing challenges in the shifting market environment, Terran can rely on Lockheed Martin as a significant stakeholder and customer. The removal of the Rivada deal from the contract backlog may have reduced the backlog, but Terran’s association with Lockheed Martin remains strong, with the majority of its contracts tied to the defense giant. This acquisition marks a crucial step in Terran’s journey to overcome its current difficulties and thrive in the competitive space industry.
