The US space industry would undergo a major change in 2023. As multiple news sources reported at the time, the joint venture United Launch Alliance (ULA) has between Boeing (NYSE:BA) And Lockheed Martin (NYSE:LMT) was for sale and a deal was likely to take place before the end of the year.
It didn’t happen.
Doesn’t matter, the experts said. As 2023 turned to 2024, ULA was still for sale. After all, until SpaceX’s arrival, ULA was the nation’s largest rocket launcher of NASA and national security satellites. Even after the arrival of SpaceX it was still number 2. (Well, until Rocket Labthat was it.) Sure someone would happily pay the $2 to $3 billion it would take to buy ULA in 2024?
Except 2024 is now three-quarters over, and so far no one has done that.
ULA looks incredibly cheap, so why isn’t anyone buying it?
And yet, as Reuters reported last month, ULA is still for sale. And the sales price is reportedly still in the region of $2 billion to $3 billion.
That’s probably a bargain price. As I explained in 2023, ULA generated $1.3 billion in revenue in 2022 before a transition in launch vehicles caused a drop in launch rate in 2023. However, as 2024 progresses, the launch frequency will increase again. With four launches to date, ULA has already placed more rockets into orbit in 2024 than in all of 2023. In addition, a large order book is filled with launches for Amazon‘s Project Kuiper means that ULA’s launch rate (and revenue) will only increase.
That shouldn’t be the case at long before ULA brings in its usual revenue, or better. At the typical valuation for space stocks of three or four times annual revenue, this implies that ULA should be worth between $4 billion and $5 billion.
In any logical world, that should mean that someone will take the initiative and eventually buy ULA.
Wanted: A buyer for ULA
And here’s the thing: Reuters thinks someone might want to buy ULA. Oddly enough, the company that, according to Reuters, is now in talks to make a bid for ULA is a company that no one thought was on the run when this sale process began: Sierra Space.
You remember Sierra Space. It is the subsidiary of the private defense company Sierra Nevada Corporation. It’s the company I described in 2023 as “a $5 billion space unicorn,” and a potential IPO candidate. And according to Reuters, it is the top contender to acquire ULA from Boeing and Lockheed, while other bidders such as Blue Origin and Rocket Lab are on the sidelines. As the news agency notes, both Blue Origin and Rocket Lab (and several others) had expressed interest in buying ULA in the past, but neither of these negotiations led to a deal.
However, whether these new negotiations will succeed where others have failed remains very unclear. Asked for comment on the report, Sierra Space, Boeing and Lockheed Martin all declined or did not respond.
Will Sierra Space United Buy Launch Alliance?
Normally that wouldn’t mean much. Refusing to comment on a pending acquisition before ultimately going ahead to make that takeover is standard procedure for large companies. (See Dish’s recent sale to DirecTV for a very recent example.) But in this particular case, this isn’t the only reason to be skeptical that any talks will actually lead to a deal.
Unless and until it conducts an initial public offering, Sierra Space will likely be cash-strapped and unable to make a big bid to acquire ULA — certainly not as big a bid as billionaire-backed Blue Origin might doing. Most recently, at the end of 2023, Sierra Space reportedly laid off employees to save money. Meanwhile, the available money is likely needed for the many space projects it is already involved in, including developing modules for a proposed private space station, building missile warning satellites for the Pentagon and readying its Dream Chaser spaceplane for a (much-delayed) flight. first flight in 2025.
Granted, I could be wrong about this. Indeed, I hope I’m wrong, because if, for example, Sierra Space were to first buy ULA and then take the combined company public, it would give space investors like me exactly what we’re looking for: an opportunity to invest in a company. the size and capabilities of SpaceX, which is also publicly traded.
Such a scenario could eventually occur. I just don’t think Sierra Space is the company that will make this happen.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rich Smith holds positions in Rocket Lab USA. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends Lockheed Martin and Rocket Lab USA. The Motley Fool has a disclosure policy.
Look who would buy Boeing and Lockheed Martin’s Space Business now! was originally published by The Motley Fool
