In 2023, speculation surrounding a significant shift in America’s space sector was rampant, with numerous reports indicating that the United Launch Alliance (ULA), a joint venture of Boeing (NYSE: BA) and Lockheed Martin (NYSE: LMT), was on the market, expected to finalize a deal by year’s end. However, that transaction did not materialize.
As 2024 commenced, analysts remained optimistic, noting ULA’s status as a premier launch provider for NASA and national security payloads, even in the wake of competition from SpaceX. They anticipated that a buyer would emerge willing to invest between $2 billion and $3 billion for ULA. Yet, as we near the end of 2024, no acquisition has taken place.
Despite this ongoing uncertainty, Reuters recently reiterated that ULA is still available for purchase, maintaining a reported asking price in the $2 billion to $3 billion range—a potentially attractive figure. ULA generated $1.3 billion in revenue in 2022, though it faced a dip in launch frequency in 2023. With four successful launches already this year, ULA is on track to surpass its 2023 output, buoyed by a robust order backlog, including contracts for Amazon’s Project Kuiper.
Given the anticipated recovery in launch activity, ULA’s revenue may soon return to, or even exceed, historical levels. At typical space industry valuations of three to four times annual revenue, this would position ULA’s worth between $4 billion and $5 billion. Logically, this should entice potential buyers to pursue the acquisition.
Curiously, Reuters has reported that Sierra Space, a subsidiary of Sierra Nevada Corporation, may be the frontrunner to acquire ULA. Previously described as a “space unicorn” valued at around $5 billion and seen as a potential IPO candidate, Sierra Space’s interest in ULA comes as other contenders like Blue Origin and Rocket Lab have stepped back from negotiations.
However, the likelihood of success for these talks remains uncertain. When approached for comments, Sierra Space, Boeing, and Lockheed Martin declined to respond.
Typically, companies opt for silence regarding potential acquisitions until deals are finalized; however, this situation is particularly complex. Without an initial public offering (IPO), Sierra Space may struggle with funding necessary to make a competitive bid, especially against financially robust competitors like Blue Origin. Reports from late 2023 indicated that Sierra Space was laying off employees to conserve resources, raising questions about its financial capacity to manage such a significant acquisition. The company is also engaged in various projects, including the development of modules for a planned private space station and missile warning satellites for the Pentagon, further stretching its financial commitments.
While it’s possible I may be mistaken about Sierra Space’s capacity, it seems unlikely that they will be the ones to acquire ULA and later IPO the combined entity, an outcome that many investors in the space sector would find appealing.
Investment Considerations for Boeing
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John Mackey, former CEO of Whole Foods Market, is a member of The Motley Fool’s board, while Rich Smith holds positions in Rocket Lab USA. The Motley Fool also maintains positions in and recommends Amazon, Lockheed Martin, and Rocket Lab USA.
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