L3Harris Rises on $845M Deal for Space Propulsion Unit
Shares hit a 52-week high as the defense contractor sells a majority stake to AE Industrial Partners, advancing its portfolio-shaping strategy.
Shares of L3Harris Technologies Inc. (LHX) surged to a new 52-week high on Tuesday after the defense giant announced a definitive agreement to sell a majority stake in its space propulsion and power business to AE Industrial Partners, a private equity firm specializing in the sector. The deal carries an enterprise value of $845 million and is a key step in the company's ongoing effort to streamline its extensive portfolio.
In morning trading, L3Harris stock climbed over 2% to approximately $310.92, reflecting investor approval of the move to sharpen the company's focus on its core defense and national security missions. The transaction with AE Industrial Partners involves a 60% controlling interest in the unit, with L3Harris retaining a 40% stake, signaling a continued partnership.
This divestiture is a direct result of the strategic review that followed L3Harris’s landmark acquisition of Aerojet Rocketdyne. According to the company's official announcement, the sale is designed to optimize its portfolio and hone its concentration on higher-growth areas. "This transaction further aligns the L3Harris portfolio with Department of War core mission priorities," said Christopher E. Kubasik, Chair and CEO of L3Harris.
Critically, the deal carves out the business responsible for producing the RS-25 rocket engines used for NASA’s Space Launch System, which powers the Artemis missions to the moon. By retaining this high-profile program, L3Harris holds onto a key piece of its space portfolio while divesting other, less central assets. The sale advances the company's goal of rationalizing its holdings and paying down debt incurred from recent large-scale acquisitions.
Wall Street has reacted positively to the disciplined strategy. The stock's move pushed its market capitalization to nearly $57 billion. The deal has been met with a "cautiously optimistic" outlook from analysts, who see the logic in recalibrating the company's priorities. The a consensus analyst price target for LHX sits around $335, according to market data, suggesting further upside even after the recent gains.
The Wall Street Journal reported that the sale to a specialized firm like AE Industrial Partners is seen as a logical step for the rocket-engine business. The retained 40% stake allows L3Harris to continue benefiting from the unit's performance while freeing up capital and management attention for its primary defense electronics and communications segments.
The transaction is expected to close in the second half of 2026, subject to customary closing conditions and regulatory approvals. The move underscores a broader trend among large-cap defense contractors to refine their business lines in response to evolving national security demands and investor pressure for improved margins and capital efficiency.