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Lockheed Martin has announced its acquisition of Terran Orbital, a move that will transition the struggling spacecraft manufacturer to private ownership. This development comes as Lockheed seeks to navigate the challenges facing Terran, which has been experiencing significant financial difficulties.
The acquisition deal values Terran Orbital at approximately $450 million, a reduction from Lockheed’s earlier bid of nearly $600 million made in March. Under the terms of the agreement, Lockheed intends to purchase Terran’s outstanding common stock at a price of 25 cents per share, in addition to assuming Terran’s debt and establishing a $30 million capital facility to support the company during the transition period.
As of the close of trading on Wednesday, Terran’s stock was valued at 40 cents per share. The acquisition is anticipated to finalize in the fourth quarter of this year, allowing Terran to avert a potential financial crisis characterized by its dwindling cash reserves and considerable debt burden. Recent reports indicated that Terran’s cash reserves fell below $15 million by the end of July, coupled with a debt load approximating $300 million.
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Terran Orbital entered the public market via a special purpose acquisition company (SPAC) in early 2022, boasting an initial valuation of $1.8 billion. However, like many newly public space companies, it has faced substantial challenges due to changing market dynamics and risk perceptions.
Lockheed Martin’s existing relationship with Terran Orbital further solidifies the acquisition’s rationale, as the defense contractor had already invested in Terran during the SPAC process and again towards the end of 2022. In fact, Lockheed accounts for a significant portion of Terran’s revenue, representing 70% of its $30.4 million earnings in the second quarter.
Terran Orbital formerly secured a significant contract with Rivada Space Networks, valued at $2.4 billion for the production of 300 satellites, 18 months ago. However, the anticipated revenue from this agreement has yet to materialize meaningfully, with Terran recognizing only $6.2 million from this contract during the first half of the year. Moreover, the company recently decided to exclude the Rivada deal from its total contract backlog, which has now diminished by 88%, dropping from $2.7 billion to $312.7 million. Notably, 91% of Terran’s remaining contracts are linked to programs associated with Lockheed Martin.
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