Explaining Southern California's economy

Rocketdyne is only worth half an Instagram?

Mercer 10129

AP Photo/Reed Saxon

This Feb. 12, 2009 photo shows buildings at the old Rocketdyne facility, the Santa Susana Field Laboratory, in the Simi Valley area near Los Angeles. The company was just sold for $550 million.

The success of SpaceX and its historic Space Station servicing mission put the space business in California back on the map. But the sale of on a space pioneer in the Golden State reminds us that the economy has changed. In the 1950s, high-tech meant aerospace and rocketry. In the second decade of the 20th century, those industries still command respect and inspire a romantic view of the future. But if you want to sell your company for billions, smartphones and photo-sharing apps are the way to go.

This encapsulates the rise of Silicon Valley and the decline of Southern California. Although SoCal can still turn in some good results. As I reported back in March, United Technologies decided to sell Rocketdyne — the company makes exactly what it sounds like it makes, rocket boosters — to fund a record-breaking $16.5-billion acquisition of Goodrich Corp. UT has now completed that sale, to GenCorp for $550 million, according to the L.A. Times.

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United Technologies is selling very-cool-named Rocketdyne

Mercer 10129

AP Photo/Reed Saxon

This Feb. 12, 2009 photo shows buildings at the old Rocketdyne facility, the Santa Susana Field Laboratory, in the Simi Valley area near Los Angeles.

You'd have to work pretty hard to find a company with a cooler name and cooler history than Rocketdyne, located in Canoga Park, Calif. The firm makes rocket engines and has, under its own (cool) name since the mid-1950s. Now it's being sold by parent United Technologies, so that UT can spend $16.5 billion to buy Goodrich Corp.

Rocketdyne is currently part of Pratt & Whitney and is no stranger to getting passed around. The sale is also a good example of how even relatively sold companies like United Technologies (market cap: around $78 billion) need to go through some gyrations to grow. 

According to Businessweek, UT wanted to sell $4 billion in new stock to fund its purchase of Goodrich, but it's now going to sell assets, including Rocketdyne, and issue a pile of new debt. Given that the assets sales are likely to raise only about $3 billion, UT might have had to take on new debt anyway. But there's no mention in press reports of using stock for the transaction, so this is looking pretty much like a cash-and-debt deal.

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