The U.S. government will invest $1 billion in L3Harris Technologies’ rocket motor business, ensuring a steady supply for missiles like Tomahawks and Patriot interceptors. This investment follows recent government stakes in companies like Intel and critical mineral producers, and comes after President Trump criticized defense contractors for slow production.

L3Harris will spin off its rocket motor business into a new publicly traded company with the government’s $1 billion convertible security investment, set to convert to common equity when the company goes public in 2026. This move aligns with the Trump administration’s consideration of equity stakes in major defense contractors.

The government’s investment in L3Harris raises potential conflicts of interest, as the Pentagon will have an ownership stake in a company bidding on defense contracts. This marks the first direct-to-supplier partnership under the new Acquisition Transformation Strategy, aiming to negotiate and invest directly with suppliers to save money.

L3Harris’ Missile Solutions unit, producing propulsion systems for missiles like Patriot and Tomahawk, will be separated from the parent company, with L3Harris retaining majority ownership. This move ensures a consistent flow of business for the new entity, bolstered by a recent agreement to increase PAC-3 missile production.

The transaction structure involving a government convertible preferred security and a planned public offering, while maintaining parent company control, is uncommon in the defense sector. This unique arrangement may face scrutiny from regulators and lawmakers due to concerns about conflicts of interest and market competition.

Read more at Yahoo Finance: Pentagon to invest $1 billion in L3Harris rocket motor business