L3Harris Shares Jump on $845M Space Unit Divestiture Deal
Defense giant to sell a majority stake in its space and propulsion business to AE Industrial Partners, sharpening its focus on core national security contracts.
L3Harris Technologies Inc. (NYSE: LHX) saw its shares climb nearly 4% on Tuesday after reports emerged that the defense contractor is nearing a deal to sell a majority stake in its space and propulsion division to private equity firm AE Industrial Partners.
The transaction values the unit at an enterprise value of approximately $845 million. L3Harris is set to receive over $500 million in cash for a 60% interest, while retaining a 40% stake in the business, according to a report from Reuters.
Shares of L3Harris surged as much as 3.7% to $304.48 in morning trading, pushing the company's market capitalization to nearly $57 billion and placing the stock near its 52-week high. The move was met with investor approval as it signals a clear step in the company's broader strategy to streamline its vast portfolio and concentrate on its higher-margin core defense operations.
The divestiture is part of a multi-year effort by L3Harris to optimize its portfolio following the 2019 merger of L3 Technologies and Harris Corporation. The Melbourne, Florida-based firm has been shedding non-core assets to sharpen its focus on national security and advanced military technology.
The assets included in the deal are central to commercial space missions, including the RL-10 rocket engines used in the upper stages of launch vehicles like the ULA Vulcan rocket. The portfolio also features in-space propulsion systems crucial for satellite maneuvering. However, L3Harris will retain its RS-25 engine program, which powers the main stage of NASA’s Space Launch System (SLS) rocket for the Artemis moon missions, underscoring its commitment to high-priority government space programs.
For the buyer, AE Industrial Partners, the acquisition deepens its portfolio in the aerospace and space sectors. The private equity firm has a history of investing in the industry, with holdings in companies like Redwire and Firefly Aerospace. This purchase positions AEI to consolidate and grow the commercial applications of the acquired propulsion technologies.
The deal allows L3Harris to unlock value from these assets while still participating in their future growth through its 40% minority stake. The more than $500 million in expected proceeds will likely be used to pay down debt or reinvest in its primary defense segments, which include integrated mission systems, space and airborne systems, and communication systems.
This strategic repositioning allows L3Harris to concentrate resources on more lucrative and stable government contracts amid a complex geopolitical landscape that is driving defense spending globally. By narrowing its focus, the company aims to enhance profitability and deliver more predictable returns for shareholders.
The transaction is expected to close in the second half of 2024, subject to regulatory approvals and customary closing conditions. Investors will be watching closely to see how the partnership with AEI evolves and how the sharpened strategic focus impacts L3Harris’s performance in the coming quarters.