Some are wondering how long Aerojet Rocketdyne Holdings Inc. of El Segundo will remain independent.
The speculation comes after Northrop Grumman Corp.’s Sept. 18 acquisition of rival rocket engine maker Orbital ATK Inc. for $9.2 billion in cash and assumed debt – an example of a legacy company following a trend of vertical integration among relative newcomers to the rocket industry.
Aerojet’s stock rose 21.4 percent the day prior to the Northrop-Orbital deal announcement to close at $33.87 a share on Sept. 25. The price has been stoked by Wall Street trader speculation that the rocket engine manufacturer might be snatched up next. Comments to CNBC from Leanne Caret, chief executive of Chicago-based Boeing Co.’s defense, space and security division, about potential acquisitions added fuel to the fire.
Aerojet’s engines and propulsion systems have been a part of every manned space mission since the U.S. program first took flight in 1959, but, despite its storied history, the company is a relatively small player in the aerospace industry with a market capitalization of about $2.5 billion. Boeing is worth $150 billion and Lockheed Martin Inc. is valued at $88 billion.
The industry nonetheless relies on Aerojet’s rocket engines. Boeing uses the company’s rocket motors for certain stages of launch vehicles produced through its joint-venture with Lockheed – dubbed United Launch Alliance – and plans to use Aerojet’s engines on its heavy-lift launch vehicle, the Space Launch System. Lockheed also uses Aerojet’s engines in an anti-ballistic missile system, among other uses.
Aerojet is bidding to supply the main rocket engines to United Launch Alliance’s forthcoming heavy-lift rocket, the Vulcan. It is the underdog in that bid, with billionaire Jeff Bezos’ Blue Origin of Kent, Wash., considered the favorite.
Any acquisition of Aerojet probably won’t take place until a buyer knows more about the company’s future revenue streams – especially its bid to make the Vulcan’s main engines – said Bill Ostrove, an aerospace and defense analyst with Forecast International Inc. of Newtown, Conn.
“If they don’t win that they are going to be a much weaker company than they are now,” he said. “I’d imagine that any buyer would wait to see the outcome of that competition.”
Paper Chaser
No one likes paying bills – especially on paper.
Papaya of Sherman Oaks wants to speed up the process – and reduce the annoyance – of paying paper bills with an app, which allows users to pay bills by taking a picture of an invoice and then a picture of their credit card. Papaya does the rest, transforming the text of the paper into digital form and inputting that information into any online bill-pay portal. Users are sent a payment confirmation.
The startup believes that younger users will be especially taken with the idea of automated mobile bill paying as they do pretty much everything else on their phones.
“The millennials are starting to have kids and bills and financial responsibilities. This is the demographic that expects to do everything through an app,” said Patrick Kann, Papaya’s chief executive. “(For them), finding a computer to make payments feels as antiquated as mailing a check.”
Kann said particular areas of opportunity include medical bills and municipal parking tickets – two industries that have been slow to modernize.
“Ninety-two percent of our bills (being processed on the Papaya app) are actually health-related bills because they are usually a pain to pay,” he said. “No pun intended.”
The company makes money from taking an undisclosed cut of credit card fees. Credit card companies are willing to part with a portion of their fees because Papaya brings them additional business, according to Kann. On a monthly basis, the company processes several million dollars in bills, he said.
Laundry Service
ZestFinance of Hollywood is best-known for using algorithms and alternative credit variables, such as social network connections and web-browsing habits, to assess the risk of lending money to prospective borrowers.
The company now aims to use its risk-assessment abilities in another corner of the financial industry: anti-money-laundering.
Anti-money-laundering software is already used across the financial industry, but Douglas Merrill, chief executive and co-founder of Zest, said he believes current programs raise too many alerts – nine of 10 money-laundering alerts are false alarms, according to a PricewaterhouseCoopers study cited by Merrill.
Zest’s anti-money-laundering software doesn’t replace existing software, instead it sits across multiple programs at once to help financial firms prioritize transaction alerts that deserve further investigation and scrutiny, said Merrill.
“It runs a risk model and yields a risk ranking that is far better than current systems because we are using more math and data,” he said, noting that fewer false alarms should help save money and please customers. “Our customers are going to block a lot fewer transactions.”
Staff reporter Garrett Reim can be reached at [email protected] or (323) 549-8332.
