Lockheed Martin offers to buy small satellite supplier in $606 million deal

Lockheed Martin is offering to buy Terran Orbital, a publicly traded manufacturer and operator of small satellites based in Boca Raton, Florida, in a deal valued at about $606 million.

The deal would mean acquiring a financially struggling company that’s a significant supplier of small satellite bodies to Lockheed Martin Space, the Jefferson County-based division of the defense and aerospace giant.

“Terran represents an attractive opportunity for Lockheed Martin, and we are treating the potential transaction as a strategic priority,” Lockheed Martin said in a March 1 letter relaying a non-binding offer to Terran shareholders. “Terran’s superior capabilities and business momentum align with one of Lockheed Martin Space’s strategic growth priorities and the transaction would accelerate that strategy.”

Terran Orbital (NYSE: LLAP) sought a buyer late last year after its market value sank low enough that it faced de-listing from the New York Stock Exchange just 23 months after its stock market debut.

Lockheed Martin offered to pay $1 per share for Terran Orbital’s stock, of which it estimated there are 223 million shares outstanding. The offer also would pay about $70 million for outstanding convertible warrants and assume repayment of about $313 million of Terran Orbital’s debt, according to Lockheed Martin's letter filed with the U.S. Securities and Exchange Commission.

Lockheed Martin estimated that the cash offer represented an 11% premium to Terran Orbital’s recent stock price.

“We are committed to an acquisition of Terran and stand ready to work with you to negotiate a mutually acceptable transaction on an expedited timeline,” Lockheed Martin’s letter to Terran Orbital shareholders said. “To that end, we believe with the Company’s full attention, the transaction could be announced quickly.”

Just five months ago, Lockheed Martin Space selected Terran Orbital to supply 36 small-satellite bodies for Lockheed’s $700 million contract to build satellites for the U.S. Space Development Agency’s data transport satellite fleet for the U.S. military.

It was the latest collaboration between the companies.

Lockheed Martin was already Terran Orbital’s dominant customer, accounting for 79% of its sales revenue.

Lockheed Martin and Terran Orbital reached a collaboration agreement starting 2017 and lasting through 2035 under which the companies would share some business development opportunities, including military and defense projects. Lockheed invested $100 million in Terran Orbital and loaned it money.

But Terran Orbital wasn’t doing well financially and regularly posted losses since going public.

Lockheed Martin said it expects to be the largest revenue-generating customer for Terran Orbital for the foreseeable future, which gives the company insight into the small satellite maker’s business value.

“Lockheed Martin’s longstanding working relationship with Terran and our position as Terran’s largest customer underpins our confidence in the parties’ strong cultural alignment and our ability to expeditiously and successfully integrate Terran and its people with Lockheed Martin,” the company’s letter to Terran shareholders said.

Small satellite manufacturing has become increasingly important to Lockheed Martin Space. Earlier this year, it won another SDA contract, the latest in a string of projects for the agency.

Last summer, Lockheed Martin Space opened a small satellite factory on its headquarters campus near the mouth of Waterton Canyon.