L3Harris to sell majority ownership of space propulsion unit to AE Industrial

L3Harris Technologies has agreed to sell a majority stake in its space propulsion and power systems business to AE Industrial Partners, the private equity firm behind other space companies such as Firefly Aerospace and York Space Systems.

AE Industrial will acquire a 60% stake in the unit, which develops rocket engines and other propulsion systems for use in both ground launch and in-space applications. L3Harris said Monday it is keeping the other 40% and valuing the stake AE Industrial will own at around $845 million.

Both parties expect to close the transaction in the second half of this year, while AE Industrial plans to restore and use the Rocketdyne name for the business. L3Harris acquired Aerojet Rocketdyne in 2023 with the intent of getting deeper into supply chains that include munitions and feed into larger systems.

For L3Harris, the partial divestiture of this unit is aimed at refocusing the company toward national defense priorities such as missile defense. The business involved in this transaction is known for making the RL-10 upper-stage rocket engine that powers government and commercial space launches.

“L3Harris is strongly committed to the Department of War’s vision for a faster, more agile defense industrial base while remaining laser-focused on driving value for our shareholders and customers,” L3Harris’ chief executive Chris Kubasik said in a release.

The transaction agreement does not include the RS-25 rocket engine, which powers NASA’s Space Launch System for the Artemis moon landing program. L3Harris is keeping the program to maintain continuity with NASA.

AE Industrial and L3Harris view their partnership in the business as helping speed up the development of future technologies, including nuclear propulsion to aid in future deep-space exploration and operations in the region between Earth and the Moon.

“Rocketdyne is more than just a company, it is the birthplace of U.S. rocket propulsion,” said Kirk Konert, a managing partner at AE Industrial. “This transaction will not only modernize and give new life to a pioneer of space and national defense technology, but it will also create a new hybrid model of agile collaboration, combining the stability and power of a national defense prime with the innovation of a specialized investor. By taking the historic engine – the RL10 – and applying modern manufacturing discipline, we will honor its design while revolutionizing the production line.”

Firefly undertook an initial public offering during the summer after approximately two years of the launch systems maker being majority-owned by AE Industrial, which kept 41.8% of the stock. York Space Systems is also going through the IPO process and has been majority-owned by AE Industrial since 2022.

Jefferies acted as exclusive financial adviser to L3Harris.