Terran Orbital facility in Irvine, California. Photo: Terran Orbital

Lockheed Martin made an offer to acquire Terran Orbital on Friday, and Terran Orbital responded by adopting a limited duration stockholder rights plan, which is also known as a “poison pill.”  

According to SEC filings, Lockheed Martin submitted a proposal on March 1 to acquire satellite manufacturer Terran Orbital for $1 in cash for each share of outstanding common stock, more than $70 million in cash for outstanding warrants, and to assume or repay the company’s $313 million in debt. 

Lockheed noted this price is a 38% premium to $0.72 closing stock price on December 11, 2023. Terran Orbital’s stock has been trading between 80 cents and $1 for the past month, and it closed at $1.18 on Monday after the news of the offer. 

“Terran represents an attractive opportunity for Lockheed Martin, and we are treating the potential Transaction as a strategic priority. Terran’s superior capabilities and business momentum align with one of Lockheed Martin Space’s strategic growth priorities and the transaction would accelerate that strategy,” the proposal reads. 

Lockheed Martin has a strategic investment in Terran Orbital and invested $100 million in the company in October 2022. 

Lockheed Martin noted in the acquisition proposal that it is Terran Orbital’s largest revenue generating customer and the company is “confident” it “will continue to be the largest revenue generating customer for Terran for the foreseeable future.” 

Terran Orbital has one customer, Rivada Space Networks, with a $2.4 billion constellation deal, but Rivada has had delays on milestone payments for the constellation. Rivada made a year-end payment at the end of 2023. 

Terran Orbital issued a news release on March 4, announcing the board adopted a limited duration stockholder rights plan to ensure “all stockholders realize the full value of their investment in Terran Orbital.” 

The rights plan would only be exercised if a person or group acquires 15% or more of the company’s stock in a transaction “not approved by the board.” 

The rights plan is “intended to encourage anyone seeking to acquire the company, including Lockheed Martin, to negotiate with the board prior to attempting to impose a transaction that is not in the best interests of the company’s stockholders.” 

Terran Orbital has faced criticism that the company’s backlog is too concentrated with customers Lockheed Martin and Rivada. The company received a notice last year it could be delisted from the New York Stock Exchange if it is unable to raise its share price during a compliance period. 

The company also had a disgruntled group of shareholders that called for CEO Marc Bell to be replaced. Terran Orbital committed to an ongoing strategic review to maximize shareholder value. 

Bell addressed the prospect of a sale to Lockheed Martin in a call with investors last fall, saying he believes both sides benefit from an independent Terran Orbital. 

“Congress is always looking to break the stranglehold on the primes, but by partnering with them, it’s the best of ‘old space’ and ‘new space,’” Bell said in October 2023. “All the knowledge and education of the world’s largest defense contractor, coupled with the entrepreneurialism and responsiveness of a small company. We have much lower overhead, which makes us much more competitive.”