L3Harris Nears $500M Sale of Space Propulsion Stake to AE Industrial

This article summarizes exclusive reporting by Reuters and journalist Mike Stone.

Report: L3Harris Nears $500 Million Sale of Propulsion Stake to AE Industrial

L3Harris Technologies is reportedly in advanced negotiations to sell a controlling interest in its space propulsion portfolio to private equity firm AE Industrial Partners. According to exclusive reporting by Reuters, the defense contractor aims to divest a 60% stake in assets that include the RL-10 rocket engine, a critical component for United Launch Alliance (ULA) vehicles.

The deal, which sources told Reuters could be announced as early as January 5, 2026, values the stake at approximately $500 million. This transaction implies a total enterprise value of roughly $845 million for the propulsion unit. The move appears to be part of a broader strategy by L3Harris to reshape its portfolio toward national security priorities, specifically the Pentagon’s emerging missile defense initiatives.

Deal Structure and Financials

According to the reporting, the agreement is structured as a partial divestiture rather than a complete exit. L3Harris is expected to retain a 40% minority interest in the new entity, while AE Industrial Partners will take the controlling 60% share. Reuters notes that the proceeds from the sale, expected to exceed $500 million, will be utilized by L3Harris to pay down debt and invest in capacity for solid rocket motor production.

The transaction is anticipated to close in the second half of 2026, pending regulatory approvals. This structure allows L3Harris to maintain a financial foothold in the commercial launch sector while freeing up capital for its core defense contracts.

Strategic Pivot: The “Golden Dome” Initiative

The decision to sell these assets highlights a significant strategic pivot for L3Harris. Reuters reports that the company is realigning its resources to capitalize on the “Golden Dome” initiative, a multi-layered missile defense architecture proposed by the administration in 2025.

By shedding commercial and NASA-centric lines, L3Harris aims to position itself as a prime contractor for the high-priority national security programs required to build this shield against hypersonic and ballistic threats. The capital raised from the sale is reportedly earmarked for expanding missile manufacturing capabilities, directly supporting this shift in defense posture.

Asset Breakdown: What Stays and What Goes

The deal involves a specific segmentation of L3Harris’s propulsion capabilities, largely acquired during its purchase of Aerojet Rocketdyne in 2023.

The Sold Portfolio

AE Industrial Partners is set to acquire the “Propulsion Portfolio,” which includes assets vital to the commercial space supply chain:

• RL-10 Rocket Engine: The upper-stage engine used by ULA’s Vulcan and Atlas V rockets.
• In-Space Propulsion: Systems utilized for satellite maneuvering and station-keeping.
• Launch Electronics: Avionics supporting flight operations.

Retained Assets

Conversely, Reuters indicates that L3Harris will keep the RS-25 rocket engine program. As the core stage engine for NASA’s Space Launch System (SLS), this asset is tied to long-term government contracts for the Artemis program, fitting the company’s preference for stable, government-backed revenue streams.

AE Industrial’s Vertical Integration Strategy

For AE Industrial Partners, this acquisition represents a major step toward vertical integration in the space sector. The firm already holds a significant portfolio of space companies, including launch provider Firefly Aerospace and infrastructure firm Redwire.

Acquiring the RL-10 engine provides AE Industrial with a “crown jewel” component that powers competitor rockets, effectively securing a revenue stream from the broader launch market while bolstering its internal capabilities. Reuters suggests this move consolidates critical launch capabilities under one private equity roof, potentially creating a new “super-integrator” to rival traditional prime contractors.

AirPro News Analysis

The reported sale underscores a growing trend where private equity firms are stepping in to manage legacy space hardware that traditional defense primes no longer view as core to their growth strategies. For L3Harris, the logic is clear: the margins and growth potential in the “Golden Dome” missile defense architecture likely outweigh the steady but slower-growing commercial propulsion market.

However, the transfer of the RL-10 engine, a single point of failure for U.S. national security launch, to a private equity-backed entity will likely draw scrutiny. Industry observers will be watching closely to see if AE Industrial prioritizes production stability and R&D investment for this workhorse engine, or if financial engineering takes precedence. If successful, AE Industrial could effectively control a significant portion of the Western launch supply chain, supplying engines to the very companies its other portfolio assets compete against.

Sources

Sources: Reuters