The U.S. government will invest $1 billion in L3Harris Technologies’ rocket motor business to help ensure a stable supply of propulsion systems used in a range of missiles, including the Tomahawk and Patriot.
L3Harris announced Tuesday it will spin off its missile propulsion business into a separate publicly traded company. The government’s investment will be in the form of convertible securities, which will convert to common equity when the new company goes public, expected in late 2026.
L3Harris will retain majority ownership and operational control of the newly formed entity. The company’s Missile Solutions unit currently produces propulsion systems used in Patriot, THAAD, Tomahawk, and Standard Missiles.
The investment marks the Department of Defense’s first direct-to-supplier partnership of this structure and is part of its Acquisition Transformation Strategy, which calls for negotiating directly with critical suppliers to support production and reduce costs.
The agreement follows recent criticism by President Donald Trump over delays in defense manufacturing. It also comes after U.S. Commerce Secretary Howard Lutnick said in August 2023 that the administration was considering equity stakes in major defense firms, including Lockheed Martin.
The Pentagon’s ownership stake, however, has raised questions about potential conflicts of interest, as L3Harris regularly competes for federal defense contracts.
The transaction structure—combining a government convertible preferred investment, future public offering, and continued majority ownership by the parent company—is rare in the defense sector and may draw scrutiny from lawmakers and regulators.
Separately, the U.S. signed a seven-year agreement last week with Lockheed Martin to boost annual production of the PAC-3 interceptor missile, part of the Patriot system, from 600 to 2,000 units.
The chipmaker Intel has seen its stock more than double following a similar U.S. government investment, though it remains unclear how the L3Harris deal will affect the defense sector.
