{"id":406137,"date":"2026-01-14T06:52:07","date_gmt":"2026-01-14T06:52:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/406137\/"},"modified":"2026-01-14T06:52:07","modified_gmt":"2026-01-14T06:52:07","slug":"pentagon-to-invest-1-billion-in-l3harris-rocket-motor-business","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/406137\/","title":{"rendered":"Pentagon to invest $1 billion in L3Harris rocket motor business"},"content":{"rendered":"

L3Harris to separate rocket motor unit for IPO in 2026Pentagon’s investment marks first direct-to-supplier partnershipTransaction structure may face scrutiny over conflicts of interestJan 13 (Reuters) – The U.S. government will invest $1 billion in L3Harris Technologies’ (LHX.N), opens new tab<\/a> growing rocket motor business, guaranteeing a steady supply of much-needed motors for a \u200bwide range of missiles such as Tomahawks and Patriot interceptors.The deal announced on Tuesday represents the latest U.S. government investment<\/a> in Corporate America, which has included a \u200c10% stake in chipmaker Intel (INTC.O), opens new tab<\/a> and investments in critical mineral producers.<\/p>\n

Sign up here.<\/a><\/p>\n

“We are fundamentally shifting our approach to securing our munitions supply chain,” said Michael Duffey, under secretary of defense for acquisition and sustainment. “By investing directly in suppliers we are building the resilient industrial base needed for the Arsenal of Freedom.”<\/p>\n

L3Harris, whose shares rose 1%, said it plans to sell new equity in its growing rocket motor business, creating a new company backed by a $1 billion government convertible security investment. The government securities will automatically convert to common equity when the company goes public later in 2026.<\/p>\n

Chris Kubasik, L3Harris’ CEO, told reporters he expected \u200cannual growth rates at the new missile business to be in the mid-to-high teens.<\/p>\n

PENTAGON\u2019S DIRECT INVESTMENT MARKS STRATEGY SHIFTLast week, U.S. President Donald \u200bTrump signed an executive order<\/a> to tie share buybacks, dividends and executive pay to weapons delivery schedules. He and the Pentagon have criticized the defense industry for what they say are high costs and slow production, and have promised dramatic changes to make production of war equipment more nimble.The investment in a defense contractor is not a total surprise after U.S. Commerce Secretary Howard Lutnick \u200dsaid in August the Trump administration was weighing equity stakes in major defense contractors<\/a>, including Lockheed Martin (LMT.N), opens new tab<\/a>.<\/p>\n

The investment in Intel has been a boon for that company, whose shares have more than doubled since the announcement. But the government’s equity position in L3Harris could face blowback from L3Harris’ rivals, given it creates a potentially significant conflict of interest for the U.S. government. The Pentagon will have an ownership stake in a company that regularly \u2060bids on major defense and other government contracts.<\/p>\n

Northrop Grumman (NOC.N), opens new tab<\/a>, which bought rocket maker Orbital ATK in 2017, is the other big rocket motor producer. A Northrop spokesperson said the company has industry-leading \u200dlevels of investment and is focused on speedy delivery of capabilities to the military.<\/p>\n

The new rocket motor entity’s competitors may be at a disadvantage after the government investment, TD Cowen analyst Gautam Khanna said in \u200ca note.<\/p>\n

Duffey, \u200cwho is the Pentagon’s chief weapons buyer, told Reuters in a statement that the department “remains committed to full and open competition, and would not include consideration of this investment in procurement decisions.” He added that the Pentagon “does not direct contractors as to which solid rocket motor is included in a particular missile.”<\/p>\n

The investment marks the first direct-to-supplier partnership of this kind by the Pentagon, which has a new strategy to negotiate and invest directly with critical suppliers to save money.<\/p>\n

L3Harris’ Missile Solutions unit, which produces missile propulsion systems for many missiles, including Patriot, THAAD<\/a>, Tomahawk, and the Standard \u2060Missile, will be carved out from the company. \u2060L3Harris will retain majority ownership and control \u200bof the new entity. The deal all but guarantees a steady flow of business for the new unit.<\/p>\n

\u201cRecent Trump Administration actions have placed renewed emphasis on strengthening the defense industrial base and reinvigorating competition following a 30-year wave of consolidation,” Kubasik said in a statement. “Building on several years of sustained investment and operational improvements by L3Harris, this new company will serve as a key partner” to the Pentagon.<\/p>\n

The Pentagon said \u200dthe deal allows it “to negotiate multi-year procurement framework agreements for solid rocket motors, vital to several critical munitions, pending congressional authorization and appropriations.”<\/p>\n

Last week, the U.S. inked a separate seven-year agreement with Lockheed Martin to increase production of the PAC-3 missile<\/a>, the type launched by the Patriot system, to 2,000 units annually from about 600.UNUSUAL DEAL STRUCTURE COULD FACE SCRUTINY<\/p>\n

The transaction structure \u2014 combining a government convertible preferred security with a planned public offering while maintaining \u200bparent company control \u2014 is highly unusual in the defense sector and may face scrutiny from regulators and lawmakers \u200dconcerned about conflicts of interest and market competition.<\/p>\n

An IPO is planned in the second half of 2026 and could help the U.S. government turn a profit on its investment.<\/p>\n

J.P. Morgan Securities LLC is acting as financial adviser to L3Harris, and \u200bVinson & Elkins LLP is acting as its legal adviser.<\/p>\n

Reporting by Mike Stone in Washington; Additional reporting by Aishwarya Jain in Bangaluru; Editing by Chris Sanders, Lincoln Feast, Louise Heavens and Rod Nickel<\/p>\n

Our Standards: The Thomson Reuters Trust Principles., opens new tab<\/a><\/p>\n

Purchase Licensing Rights<\/a><\/a><\/p>\n

Mike Stone is a Reuters reporter covering the U.S. arms trade and defense industry. Most recently Mike has been focused on the Golden Dome missile defense shield. Mike also spends a lot of his time writing on Ukraine and how industry has adapted, or faltered as it supports that conflict. Mike, a New Yorker, has extensively covered how the U.S. has supplied Ukraine with weapons, the cadence, decisions and milestones that have had battlefield impacts. Before his time in Washington Mike\u2019s coverage focused on mergers and acquisitions for oil and gas companies, financial institutions, defense companies, consumer product makers, retailers, real estate giants, and telecommunications companies.<\/p>\n","protected":false},"excerpt":{"rendered":"L3Harris to separate rocket motor unit for IPO in 2026Pentagon’s investment marks first direct-to-supplier partnershipTransaction structure may face…\n","protected":false},"author":2,"featured_media":406138,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27],"tags":[182524,182525,182541,182548,182526,183329,89749,192345,28,10211,184747,182530,188623,184371,184322,95629,184706,182540,182539,183093,183092,188624,7611,190749,74353,182531,5968,182532,182533,184375,184378,6199,186109,27414,192349,192350,184366,182549,183097,183077,37215,195598,195599,183078,188625,183338,195600,184704,155973,184381,172,183339,26311,182551,192343,182550,25,183085],"class_list":["post-406137","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-aer","tag-aero","tag-aero1","tag-amers","tag-bact","tag-bisv","tag-biz","tag-bmat","tag-business","tag-chip","tag-chip1","tag-cmpny","tag-comair","tag-dbt","tag-deal1","tag-def","tag-defbuy","tag-destocabsm","tag-destousbsm","tag-destousdnm","tag-destoustpm","tag-dvst","tag-fin","tag-fine1","tag-fins","tag-gen","tag-hot","tag-indg","tag-inds","tag-invbis","tag-invm","tag-ipo","tag-mevn","tag-min","tag-mine","tag-mtal","tag-mtpix","tag-namer","tag-packageus-top-news","tag-pol","tag-potus","tag-prec","tag-precal","tag-publ","tag-pve","tag-pxp","tag-rearth","tag-rulestrump","tag-semi","tag-stx","tag-tech","tag-teeq","tag-tmt","tag-topcmb","tag-topicmarkets-commodities-metals","tag-topnws","tag-us","tag-wash"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/406137","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=406137"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/406137\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/406138"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=406137"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=406137"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=406137"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}