Lockheed Martin Offers to Acquire Terran Orbital for $293 Million
Lockheed Martin Corp. (NYSE: LMT) has made a $293 million proposal to acquire small satellite manufacturer Terran Orbital (NYSE: LLAP) that values outstanding shares at $1.00.
The amount is significantly lower than the $12.69 that shares were worth when Terran Orbital began trading on the New York Stock Exchange (NYSE) less than two years ago after merging with a special purpose acquisition company (SPAC).
In a letter filed with the Securities and Exchange Commission (SEC) on Friday, Lockheed Martin’s said its offer included:
$1.00 per share for approximately 223 million common stock and dilutive stock-based compensation,
more $70 million in aggregate cash for 103 million outstanding warrants, and
assumption or repayment of $313 million in debt liabilities.
If a deal is completed, Terran Orbital would be delisted from the New York Stock Exchange (NYSE). The company’s stock rose nearly 3 percent in after-hours on Friday to close at $1.10.
Lockheed Martin owns 28.3 percent of Terran Orbital through investments it has made in the company since June 2017. Lockheed uses the company as a subcontractor on small satellite orders it receives from the U.S. government.
“Lockheed Martin continues to be Terran's largest revenue generating customer accounting for the majority of the backlog (81% as of December 31st, 2022),” the letter said. “In addition to being the largest historical revenue generating customer we are confident that we will continue to be the largest revenue generating customer for Terran for the foreseeable future.”
Terran Orbital has faced struggles with revenue and shareholders unhappy with the decline in the stock price. In October 2023, Terran Orbital received a notice from NYSE of possible delisting after its shares fell below $1.00. Terran Orbital was given 180 days remedy the problem.
Earlier that same month, a group of shareholders called for the ouster of CEO Marc Bell and a restructuring of the company’s board of directors. In February, the company and the shareholders announced an agreement to settle the issues.
“Under the terms of the Agreement, the Company’s Board, in consultation with the Investor Group, has agreed to identify and appoint an independent director to fill its vacant seat caused by the passing of Anthony Previte, reflecting the Company’s continual efforts to enhance stockholder value and corporate governance practices,” Terran Orbital said in a press release.
“The Company remains committed to exploring a number of value-creating initiatives as part of its ongoing strategic review process, including those related to the Company’s operations, financial performance (including potential opportunities for cost reduction), and corporate governance, among others,” the announcement added.
Terran Orbital has a contract to build 300 satellites for Rivada Space Networks at a price of $2.4 billion. However, Rivada has been slow in making payments, raising questions about whether the company will be able to raise the necessary funds for Terran Orbital to build the constellation.
The company said it received a milestone payment from Rivada at the end of 2023. Although the company did not specify the amount, it did update its cash on hand from $38.7 million at the end of the third quarter on Sept. 30 to $70 million as of Dec. 31.
Terran Orbital began trading on March 28, 2022, after a merger with Tailwind Two Acquisition Corp. that brought in $255.4 million to the small satellite manufacturer. Lockheed Martin provided some of the funding for the deal.
Tailwind Two was a SPAC, a blank check company already traded on NYSE whose sole purpose was to find a merger partner to take public under that company’s name.
A host of space companies went public via SPACs beginning with Virgin Galactic in October 2019. If Lockheed Martin’s acquisition is completed, Terran Orbital would be the second space SPAC to be delisted. Launch provider Virgin Orbit, which spun off from Virgin Galactic, went bankrupt and ceased operations last year.