Pentagon to invest $1 billion in L3Harris rocket motor unit

The U.S. government will invest $1 billion in a spun-off L3Harris rocket motor business via a convertible security that will convert to common equity when the unit goes public later in 2026.

The U.S. government will invest $1 billion in L3Harris Technologies' rocket motor business, the company announced on Jan. 13. L3Harris plans to spin off its Missile Solutions unit into a new publicly traded company. The investment will take the form of a government convertible security that is set to convert to common equity when the unit goes public later in 2026. L3Harris will retain majority ownership and control of the new entity. Key facts: - The government will provide a $1 billion convertible security to the spun-off rocket motor business. - The securities are designed to automatically convert to common equity when the new company goes public later in 2026. - The Missile Solutions unit produces propulsion systems for missiles including Patriot, THAAD, Tomahawk, and the Standard Missile. - L3Harris will keep majority ownership and control of the carved-out unit after the transaction. - The investment is described as part of the Defense Department’s Acquisition Transformation Strategy and its "Go Direct-to-Supplier" initiative. - Observers noted the transaction structure is unusual for the defense sector and may draw scrutiny from regulators and lawmakers because the government would hold an ownership stake in a company that bids on government contracts. Summary: The transaction creates a direct government-to-supplier financing arrangement intended to secure the business and supply of rocket motors and will convert to equity at the planned public offering in 2026. The deal’s unusual structure and the government ownership stake are likely to prompt review by regulators and lawmakers in the period ahead.