The deal is Lockheed's biggest acquisition since Jim Taiclet took over as chief executive in June. He is seeking to beef up the company's propulsion capabilities amid competition from new entrants such as SpaceX and Blue Origin, for space contracts with the U.S. government.
"Acquiring Aerojet Rocketdyne will preserve and strengthen an essential component of the domestic defense industrial base and reduce costs for our customers and the American taxpayer," Taiclet said in a statement.
"As part of Lockheed Martin, we will bring our advanced technologies together with their substantial expertise and resources to accelerate our shared purpose: enabling the defense of our nation and space exploration," Aerojet's CEO Eileen Drake said in a statement.
Lockheed said it will pay $56 per share for Aerojet Rocketdyne, a 33 percent premium to Friday's closing price. The purchase price will be reduced to $51 per share after the payment of a pre-closing special dividend, Lockheed added.
The Bethesda, Maryland-based company already uses Aerojet Rocketdyne's propulsion systems in its aeronautics, missiles and fire control offerings.
Lockheed said the transaction, which is set to be scrutinized by regulators given the company's leading position in the defense sector, is expected to close in the second half of 2021.
Taiclet took the top job at Lockheed in June and closed on a deal to buy Integration Innovation, a Huntsville, Alabama-based hypersonic weapon software and systems maker, by November.