Alliant reviewing Orbital deal after rocket explosion
By Mike Stone (Reuters) - Alliant Techsystems Inc said on Wednesday it was conducting a "thorough evaluation" of an agreement to merge its space and defense business with Orbital Sciences Corp following the explosion of an Orbital unmanned supply rocket. Orbital's 14-story Antares rocket exploded on Tuesday upon liftoff while on a supply mission to deliver cargo to the International Space Station, casting doubt over the deal with Alliant Techsystems, better known as ATK. ATK called the incident an unfortunate failure and did not say in its statement when it would conclude its evaluation of the deal. "There is no specific provision in the merger agreement for a launch failure... As far as I know, I think things will continue," Orbital Chief Executive David Thompson told analysts on a conference call following ATK's statement. ATK shares were down 5.2 percent in afternoon trading in New York, giving the company a market value of $3.9 billion. Orbital was worth $1.6 billion after its shares plunged 16 percent. Orbital Chief Financial Officer Garret Pierce told analysts on the conference call that the company's exposure to the contract associated with the rocket was insured and that he foresaw no impact on the company's earnings in 2014. He added it was too early to say what the financial impact will be in 2015. Orbital's unmanned rocket was insured for around $40 million to $50 million of losses, insurance sources said. One source pinned the loss more specifically at $48 million. A London spokesman for U.S. insurance broker Willis Group Holdings Plc confirmed that it was the broker for the insurance risk but declined to comment on the insured loss. Orbital's next launch had been slated for April 2015 according to internal NASA's launch schedules. "While significant, the event should not upset the Orbital-ATK combination," Jefferies analyst Howard Rubel wrote in a note. No one was hurt in the crash late on Tuesday, authorities said. The craft was carrying a Cygnus cargo shipment bound for the station, a $100 billion research laboratory owned and operated by 15 nations. It orbits about 260 miles (418 km) above Earth. The incident is the first accident since NASA turned to private operators for such missions. Privately held SpaceX, the Hawthorne, California-based space transport company founded by Tesla Motors Inc CEO Elon Musk, competes with Orbital. COMPLEX TRANSACTION In April, Orbital and ATK struck a complicated deal that they touted as a $5 billion merger of equals. ATK, the world's largest maker of ammunition, would spin off its sporting gun and ammunition business to its shareholders and merge the rest with Orbital. The combined company, called Orbital ATK, is to be owned 53.8 percent by ATK shareholders and 46.2 percent by Orbital shareholders, with Orbital’s management expected to run the company. Orbital Chief Executive Dave Thompson will be the new company’s CEO, with nine of 16 directors from the Orbital side. The merger agreement states that under certain circumstances, ATK or Orbital may be have to pay the other party a termination fee of $50 million and expense reimbursement of up to $10 million. ATK said late on Tuesday that it would seek shareholder approval on Dec. 9 for issuance of shares to Orbital stockholders. The deal was expected to close later this year. (Reporting by Sagarika Jaisinghani in Bangalore and Mike Stone in New York and Irene Klotz in Cape Canaveral, FL; Editing by Kirti Pandey, David Gregorio and Cynthia Osterman)
