L3Harris Agrees to Sell Majority Stake in Space Propulsion Unit

L3Harris Technologies announced on Monday that it has reached an agreement to sell roughly 60% of its Space Propulsion and Power Systems business to private equity firm AE Industrial Partners for a total enterprise value of $845 million, including debt.

The deal underscores L3Harris’s broader strategy to focus more intently on defense operations and scale back certain space-oriented businesses amid a shifting global geopolitical environment.

Strategic Shift Toward Defense

L3Harris, a major U.S. aerospace and defense contractor, stated that this partial divestiture aligns with its efforts to redirect resources toward areas such as missile systems and other national security priorities. The space propulsion business being sold has historically supported both civil and defense space missions.

Despite the sale, L3Harris will retain full ownership of its RS-25 rocket engine, a key component currently used on NASA’s Space Launch System for the Artemis lunar program. The company will also maintain a 40% minority stake in the new entity alongside AE Industrial.

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Details of the Transaction

The transaction is expected to close in the second half of 2026, subject to customary closing conditions and regulatory approvals. Jefferies LLC served as the exclusive financial advisor to L3Harris on the deal.

AE Industrial Partners, a private equity firm with extensive investments in aerospace and defense, plans to use the acquisition to grow advanced propulsion capabilities, potentially including technologies for future deep-space missions such as nuclear propulsion for Mars exploration. AE Industrial’s space portfolio already includes companies like Firefly Aerospace, Redwire Space, and York Space Systems.

Market and Growth Implications

Industry analysts view this sale as part of a trend in which defense primes streamline portfolios and partner with private investors to accelerate innovation while concentrating on core capabilities. For L3Harris, proceeds from the transaction could support expanded missile and rocket motor production, debt reduction, and broader defense growth initiatives.

The deal marks a significant move in the aerospace and defense sector, reflecting both corporate restructuring priorities and the evolving investment landscape for space technology businesses.