WASHINGTON — Lockheed Martin has proposed acquiring smallsat manufacturer Terran Orbital, which it already owns a stake in and does business with, for more than $500 million.

In a U.S. Securities and Exchange Commission filing late March 1, Lockheed disclosed its offer to Terran Orbital building upon previous discussions between the companies facilitated by investment firm Jefferies LLC. Terran Orbital disclosed in an SEC filing in December that it had hired Jeffries to explore “strategic alternatives” for the company that could include a sale or a deal to take the company private.

Under the proposal, Lockheed would pay $1 per share of Terran Orbital stock it does not currently own, valuing the company at a little under $200 million. Lockheed would pay more than $70 million to buy outstanding stock warrants and assume or repay $313 million in Terran Orbital debt.

“Terran represents an attractive opportunity for Lockheed Martin, and we are treating the potential Transaction as a strategic priority,” Lockheed stated in the letter. “Terran’s superior capabilities and business momentum align with one of Lockheed Martin Space’s strategic growth priorities and the Transaction would accelerate that strategy.”

Lockheed Martin is already a major customer of, and investor in, Terran Orbital. Lockheed participated in Terran Orbital’s Series A round in 2017 and made another investment in Terran Orbital in 2022 that increased its stake in the company to more than 33%.

Lockheed has acquired Terran Orbital buses for several of its programs, including spacecraft for Space Development Agency constellation programs. It noted in its letter that its current contracts with Terran Orbital account for 81% of that company’s backlog as of the end of 2023.

“In addition to being the largest historical revenue generating customer we are confident that we will continue to be the largest revenue generating customer for Terran for the foreseeable future,” the letter stated. Notably, Terran Orbital has a contract to produce 300 smallsats for Rivada Space Network’s broadband constellation but has provided few details about the finances of that agreement other than to announce Jan. 2 that Rivada had paid all outstanding invoices to date.

Terran Orbital, which went public in March 2022 through a special purpose acquisition company (SPAC) merger, has seen its share price tumble by about 90% since then. Last fall, a group of shareholders accounting for 8.4% of the company called for a shakeup at the company, including replacing Chief Executive Marc Bell.

The company announced Feb. 5 it has reached an agreement with that group that included filling a vacant board seat with an independent director. In a statement about the agreement, Terran Orbital said it “remains committed to exploring a number of value creating initiatives as part of its ongoing strategic review process, including those related to the Company’s operations, financial performance (including potential opportunities for cost reduction), and corporate governance, among others.”

Shares in Terran Orbital closed March 1, before the SEC filing, at $1.07, down one cent. The company has not publicly commented on the offer.

Jeff Foust writes about space policy, commercial space, and related topics for SpaceNews. He earned a Ph.D. in planetary sciences from the Massachusetts Institute of Technology and a bachelor’s degree with honors in geophysics and planetary science...