Aerospace & Defense

Despite explosion, Orbital maintains 2014 outlook


Shares of aerospace and defense firms Orbital Sciences and Alliant Techsystems were briefly halted on Wednesday so the company could discuss the effects of a recent rocket explosion.

The Orbital Sciences' Antares commercial supply rocket blew up over the beachside launch complex at Wallops Island in Virginia. Trading in the stocks was halted around 12:45 p.m. ET so that Orbital, which has planned to buy Alliant, could hold a conference call to discuss the rocket's failure with investors and analysts.

Orbital Chairman and CEO David Thompson and CFO Garrett Pierce hosted the call, and the stocks resumed trading around 1:50 p.m. ET.

The Orbital Sciences Corporation Antares rocket, with the Cygnus spacecraft onboard suffers a catastrophic anomaly moments after launch from the Mid-Atlantic Regional Spaceport Pad 0A at NASA Wallops Flight Facility on October 28, 2014 on Wallops Island, Virginia.
Getty Images

"We are certainly disappointed by this failure, but in no way are we discouraged or dissuaded from our objectives to expand the Antares rocket well into the medium launch class," Thompson said, adding it is "too soon to know" how long investigations will take or if upcoming launches will be affected.

Pierce said the precise financial impact of the explosion is not yet known, but that the company's view for 2014 remains unchanged, as insurance will cover repairs and lost success payments.

Thompson indicated that he did not believe the Alliant deal is in jeopardy after the incident.

"As far as I know, I think things will continue," he said of the planned merger.

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Sources told Reuters on Wednesday that the explosion is unlikely to unravel Orbital's planned deal with Alliant.

"While significant, the event should not upset the Orbital-ATK combination," Jefferies analyst Howard Rubel wrote in a note.

Orbital's unmanned rocket was insured for around $40 million to $50 million of losses, insurance sources said. One source told Reuters the loss is more specifically around $48 million.

In April, Orbital and ATK struck a complicated deal that they touted as a $5 billion merger of equals. ATK, the world's largest maker of ammunition, would spin off its sporting gun and ammunition business to its shareholders and merge the rest with Orbital.

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The combined company, called Orbital ATK, is to be owned 53.8 percent by ATK shareholders and 46.2 percent by Orbital shareholders, with Orbital's management expected to run the company. Orbital Chief Executive Dave Thompson will be the new company's CEO, with nine of 16 directors from the Orbital side.

A review of the merger agreement shows under certain circumstances, ATK or Orbital may be have to pay the other party a termination fee of $50 million and expense reimbursement of up to $10 million.

—CNBC's Karma Allen and Reuters contributed to this report.