“We believe it is highly likely that the FTC will vote to sue to block the transaction,” Aerojet Rocketdyne said in a press release.
The company said it expects the FTC will vote on the lawsuit before Thursday. CNBC has reached out to the FTC for comment.
Shares of Aerojet Rocketdyne dropped as much as 16% in premarket trading from its previous close of $45.00.
The defense giant in December 2020 announced its intention to buy Aerojet at a $4.6 billion equity valuation. The deal was expected to close in the second half of last year, but the FTC’s review delayed the transaction to this month.
Lockheed is Aerojet’s largest customer, making up about 33% of its sales. United Launch Alliance, or ULA, makes up another 10% of Aerojet’s sales – a further complement to Lockheed Martin, which owns a 50% stake in ULA as a joint venture with Boeing.
FTC chair Lina Khan has expressed skepticism of large, vertical mergers like the Lockheed-Aerojet deal.
In a letter last year, Khan doubted that “behavioral remedies” – such as Northrop Grumman’s commitment to sell Orbital ATK rocket motors to competitors after its acquisition in 2018 – may not be “sufficient to prevent a vertical merger from causing harm.”