GenCorp Buys Rocketdyne for $550 Million

GenCorp (NYSE: GY), a manufacturer of aerospace and defense products and systems, has acquired Rocketdyne, the rocket engine manufacturing business, for $550 million.

According to the LA Times, the deal is the latest move to see the aerospace industry further consolidated, as GenCorp also owns aerospace firm Aerojet.

GenCorp CEO Scott Seymour says that the benefits of the deal are obvious, with the size of the company practically doubling overnight.

"We see great strategic value in this transaction for the country, our customers, partner supply base and our shareholders. The combined enterprise will be better positioned to compete in a dynamic, highly competitive marketplace and provide more affordable products for our customers," Seymour said.

Rocketdyne is a company with a colorful history; it was formed shortly after World War II by North American Aviation, which later merged with Rockwell International. Rockwell, in turn, became a part of Boeing (NYSE: BA). In 2005, United Technologies (NYSE: UTX) acquired Rocketdyne to combine it with its Pratt & Whitney division.

The nature of Rocketdyne's work could explain its popularity. The company currently builds rocket engines for NASA's space shuttles and let's face it, who can resist being a part of that? However, Rocketdyne is far more than a manufacturer of big boy's toys - it is a fiscally prudent move for GenCorp too. In 2011, Rocketdyne had about $750 million in sales.

Numbers like that have GenCorp convinced to take the risk, though the company said that the purchase price will be financed with a combination of cash and debt.

The sale is not expected to be concluded until early in 2013. GenCorp's press release states that, "The acquisition of PWR is conditioned upon, among other things, the receipt of required regulatory approvals and other customary closing conditions. Subject to the satisfaction of these conditions, the acquisition is expected to close in the first half of 2013. The transaction is expected to be accretive to earnings in the first year."

On Tuesday morning, GenCorp traded at about $7.50, up roughly 12.3 percent. United Technologies traded at about $73.20, down roughly 1.3 percent.

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