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One of the world’s most important rocket companies, United Launch Alliance, may be sold later this year.
The potential sale has not been made public, but three sources confirmed to Ars that potential buyers have been approached about the possibility. Those sources said a deal is expected to close before the end of this year, with investment firm Morgan Stanley and consulting firm Bain & Company managing the transaction.
The sale of United Launch Alliance, or ULA as it is known in the industry, would mark the end of an era that has lasted nearly two decades. The company was officially formed in 2005 as part of a deal brokered by the US government, which ensured the military had access to both Atlas and Delta rockets to launch national security satellites into space. To form ULA, Lockheed Martin and Boeing merged their launch operations into a single company, each taking a 50 percent stake.
This union was profitable for both parent companies, as ULA had a monopoly on launching national security missions and, effectively, NASA science probes. In return for 100 percent mission success, ULA received major launch contracts and an annual grant of approximately $1 billion from the US Department of Defense to maintain “launch readiness”.
In response to a request for comment to Boeing and Lockheed, the companies issued the following statement: “In accordance with our corporate practice, Boeing/Lockheed Martin does not comment on potential market rumors or speculation about financial activities.”
The rise of SpaceX in the early 2010s with the increasingly reliable Falcon 9 rocket began to disrupt this profitable arrangement. SpaceX sold the Falcon 9 rocket at a significant discount to ULA’s Atlas V and Delta IV rockets. The company also sued the US government to allow the Falcon 9 rocket to compete for national security missions, and SpaceX launched its first in 2017.
In recent years, SpaceX has come to dominate the United Launch Alliance in terms of cadence. By the end of 2022, the upstart was launching as many rockets each month as ULA launched in a calendar year. Over the past four years, SpaceX has actually landed more rockets than ULA has launched in its entire existence.
However, ULA still has a prominent place in the global launch industry, and there is likely to be no shortage of suitors.
The Colorado-based company has significant assets. As early as May, ULA will debut its new heavy-lift rocket, the Vulcan, which could close some of the price-competitiveness gap with SpaceX. For Vulcan, ULA has an agreement with the US military to launch 60 percent of its national security payloads from 2023 to 2027, and it will likely continue to be successful in this area. ULA has also won a commercial contract to launch 38 missions for Amazon’s Project Kuiper satellite mega-constellation. Finally, ULA has significant and valuable facilities in Colorado, Alabama, and Florida, and it has strong political capital in these states and others.
The following companies may (or may not—this is a speculative list) be among suitors for ULA as sales continue later this year.
- One of the parent companies, either Lockheed or Boeing, can buy out the other. Lockheed being on the buying side seems more likely, given that it has recently made strategic acquisitions in the launch industry, including taking a stake in ABL Space Systems.
- Amazon will likely be interested. The company owned by Jeff Bezos will have intimate knowledge of ULA’s operations after signing the Project Kuiper launch agreement and may decide that buying the company outright is better than buying services. This will give Amazon the priority access to Vulcan launches it needs to ensure the Kuiper constellation launches on time. It will also strengthen Amazon’s ties to the Department of Defense.
- Blue Origin may also be interested. This is another company owned by Jeff Bezos, but sources said there is a firewall between Blue Origin and Amazon. Blue Origin also won a share of Project Kuiper launches, 12, with its New Glenn rocket. However, there are some questions about how quickly New Glenn can be brought into commercial service, and by buying ULA, Blue Origin could consolidate its share of the Kuiper missions and earn guaranteed funding from the Department of Defense. The company would also “save” money on Vulcan launches because it could offer BE-4 rocket engines at cost.
- Other potential bidders include Northrop Grumman, which has a national security interest and supplies solid rocket engines for the Vulcan; L3Harris, which is already buying engine maker Aerojet Rocketdyne; a private equity firm that saw the industry with AE Industrial Partners’ investment in Firefly Aerospace; or even a technology company like Apple that wants to develop its own space constellation for communication purposes.
The potential sale of ULA comes with many questions for a buyer. Chief among them is likely to be the long-term viability of the traditional aerospace company at a time when SpaceX has taken the dominant position in the global launch industry. In addition, other US competitors are also coming, including Blue Origin, Rocket Lab and Relativity Space. Neither of these is a near-term threat to ULA, but within five to ten years one or more of these companies may have a fully reusable rocket priced significantly below the Vulcans.
Another important factor in ULA’s viability is the need for investment. Over the past two decades, the parent companies have tended to extract profits from ULA rather than invest in the development of new technology. The Vulcan, for example, was largely developed with money from the US military. The Department of Defense supported the development of Vulcan’s engines and solids, providing $967 million worth of development grants directly to ULA. To be competitive in the new era of commercial launch, a new owner will likely have to free ULA to innovate—and provide the funding to do so.
