United Technologies to Sell Rocketdyne

Diversified industrial company United Technologies (NYSE: UTX) is set to sell its Rocketdyne unit to Gencorp (NYSE: GY), people familiar with the matter disclosed to Reuters Thursday. The sale is the latest effort from United Technologies to divest non-core assets as it completes its $16.5 billion acquisition of Goodrich Corp (NYSE: GR).

Rocketdyne is the world's largest manufacturer of liquid-fueled rocket propulsion systems. In the wake of NASA shutting down the shuttle program, the industry in which it operates has been facing an uncertain future. United Technologies bought Rocketdyne seven years ago from Boeing (NYSE: BA) for $700 million in cash.

No deal has been finalized and the sale could still fall through depending on the details. The deal makes sense for both, as Gencorp's Aerojet subsidiary also makes solid rocket motors. The consolidation could be good for Gencorp as it would have a larger presence in the market potentially giving it better pricing power.

Reuters reported that multiple parties, including Gencorp and private equity firms, were interested in the unit and any deal would come down to the details of the exact deal. Rocketdyne is currently part of United's Pratt and Whitney division, which in total was responsible for more than 23 percent of revenue in 2011. The potential sale would be the latest asset divestiture that was caused by cuts in defense spending.

Other defense contractors such as Lockheed Martin (NYSE: LMT) have been trying to figure out the future of defense spending as the fiscal cliff looms. Lockheed has been developing the next generation fighter jet, known as the F-35 or the Joint Strike Fighter, however government spending cuts could bankrupt the program and send other programs to similar fates.