ATK Still Ready to Continue with Orbital Sciences Merger
[Via Satellite 11-20-2014] After a thorough review of Orbital Sciences’ go-forward plan following the Oct. 28 Antares rocket failure, ATK remains confident in continuing the merger of its aerospace and defense groups with Orbital. The launch mishap, for which Orbital’s Antares launch failure Accident Investigation Board (AIB) has traced the likely cause to one of the two Aerojet Rocketdyne AJ-26 engines, destroyed both Antares and its Cygnus capsule while also damaging the Mid-Atlantic Regional Spaceport (MARS) at Wallops Island, Va.
Speaking on a Nov. 19 conference call, Mark DeYoung, president and CEO of ATK said Orbital provided the company with granular operating, timing and financial assumptions around their recovery plan, and that ATK still sees long term value in continuing with the merger.
“ATK and its board have concluded, based on the information available at this time, that successful program execution of Orbital’s recovery plan is likely. The recovery plan risks are manageable; both on Orbital’s assumptions and our own stress-test scenarios that we applied,” he said.
Neal Cohen, executive vice president and CFO of ATK said Orbital provided non-public information and, where appropriate, ATK relied on outside experts to validate assumptions. Orbital’s go-forward plan centers around fulfilling its $1.9 billion Commercial Resupply Services (CRS) contract with NASA by purchasing one or two non-Antares launch vehicles for Cygnus flights and consolidating the five remaining deliveries to the International Space Station (ISS) into four. The company is also accelerating the replacement of the AJ-26 and is working closely with both NASA and MARS to ready Wallops Island for future launches in 2016.
DeYoung and Cohen said that Orbital’s resolve and NASA’s commitment to commercial space allowed them to conclude that the impact of the Antares failure would be limited. Orbital Sciences President and CEO David Thompson said on Nov. 5 that the company would complete the CRS contract with no increase in cost to NASA. And in a Nov. 17 statement, he said Orbital does not believe this plan will cause material adverse financial changes in 2015 or future years. Both DeYoung and Thompson encouraged stockholders vote to approve the proposed merger.
“This transaction as we laid out for you in April maintains the same strategic rationale, focuses our portfolio into two clear and distinct markets with two capable companies, presents a long term growth opportunity for our shareholders and positions our company for continued success,” said DeYoung.
Each company’s board of directors has recommended approving the merger. Special stockholder meetings on the merger have been pushed back to Jan. 27, 2015. Both companies anticipate the transaction will close in February 2015.
ATK also sees opportunity for greater use of its solid propellant rocket engines through working with Orbital. The two companies are working together on Stratolaunch, an air-launch vehicle project that will use a solid propulsion system to deliver payloads to orbit. In September ATK proposed a solid rocket propulsion solution to the U.S. Air Force to replace the RD-180. Only days earlier, United Launch Alliance (ULA) announced its partnership with Blue Origin to develop the BE-4 as part of a next generation launch vehicle. DeYoung expressed confidence in the ability of solid propulsion systems, but cautioned that there is no quick way to replace the RD-180.