The Federal Trade Commission (FTC) on Tuesday evening approved the acquisition by Northrop Grumman [NOC] of Orbital ATK [OA] contingent on Northrop Grumman agreeing to operate its new solid rocket motor (SRM) business independently to avoid anticompetitive behavior.
Northrop Grumman on Wednesday afternoon after the close of stock markets on the East Coast completed its $7.8 billion transaction for Orbital ATK.
To enforce a firewall around the SRM business, which Northrop Grumman is getting through the acquisition, the Defense Department’s Undersecretary of Defense for Acquisition and Sustainment will appoint a compliance officer to ensure the company complies with the FTC’s order.
The FTC vote on the consent order was unanimous.
The FTC said that Orbital ATK is “the premier supplier of SRMs,” which are essential for missile systems.
Without an order to put a firewall around the SRM business, “the acquisition would provide Northrop with the incentive and ability to harm competition for missile contracts by either withholding access to its solid rocket motors or increasing SRM prices to competitors,” the FTC said. “As a result, competitors would be forced to raise the prices of their missile systems, invest less aggressively to win missile programs, or decide not to compete at all, which, in turn, would decrease competitive pressure on Northrop.”
Northrop Grumman last September announced its agreement to acquire Orbital ATK, a deal which will increase its competitiveness in space and missile defense systems, and add tactical rocket motors and missiles to its portfolio.
Orbital ATK is the prime Defense Department contractor for maintaining the solid- and liquid-fueled rocket motors on the Minuteman 3 ICBM under a contract worth nearly $800 million when it was awarded in 2015. The company also provides solid rocket motors for the Navy’s Trident 2 submarine-launched nuclear missiles under a subcontract to Lockheed Martin.
Orbital ATK is part of Consolidated Nuclear Security: the management team for the National Nuclear Security Administration’s Y-12 National Security Complex in Tennessee and the Pantex Plant in Texas.
Orbital ATK will become Northrop Grumman’s fourth business segment and be called Northrop Grumman Innovation Systems.
