DoD & L3Harris Forge $1B 'Arsenal of Freedom' Missile Company

WASHINGTON – January 13, 2026 – In a landmark move signaling a dramatic shift in national security strategy, L3Harris Technologies and the Department of Defense (DoD) have announced a first-of-its-kind partnership to create a new, publicly traded company dedicated to solving a critical bottleneck in America’s defense capabilities: solid rocket motors.

The proposed deal involves a $1 billion investment from the DoD into L3Harris’s newly formed Missile Solutions business. This infusion of capital is designed to rapidly expand production capacity for the essential propulsion systems that power a wide range of U.S. and allied missiles. The venture will culminate in an Initial Public Offering (IPO) for the new entity, planned for the second half of 2026, creating a focused, pure-play missile propulsion provider.

This novel public-private partnership represents the most tangible execution yet of the DoD's aggressive new acquisition strategy, aimed at rebuilding the nation's defense industrial base for an era of renewed global competition.

A New Blueprint for the Industrial Base

The L3Harris-DoD agreement is not happening in a vacuum. It is a direct result of the DoD's sweeping “Acquisition Transformation Strategy,” a top-to-bottom overhaul of its procurement system initiated under a 2025 executive order. The strategy was explicitly designed to reverse decades of consolidation that saw the number of prime defense contractors shrink from over 50 to just five, creating fragility and single points of failure throughout the supply chain.

Analysts note that the strategy's core pillars—rebuilding the industrial base, increasing wartime surge capacity, and fostering innovative partnerships—are all embodied in this deal. By acting as a strategic investor rather than just a customer, the Pentagon is deploying capital to directly address market deficiencies and generate what it calls “investable demand signals” to unlock private funding.

“We’re taking action to build today’s ‘Arsenal of Freedom’ by launching a pure-play missile solutions provider,” said Christopher Kubasik, Chairman and CEO of L3Harris, in a statement. He noted that recent administration actions have “placed renewed emphasis on strengthening the defense industrial base and reinvigorating competition.”

The structure of the investment itself is telling. The DoD will provide the $1 billion through a convertible preferred security, which automatically converts to common stock upon the IPO. This gives the government a direct stake in the new company's success, aligning its interests with those of the manufacturer and future shareholders—a stark departure from traditional cost-plus contracting models.

Addressing a Critical Supply Chain Crisis

The urgency behind this initiative stems from what defense experts have termed a “perilous crunch” in the solid rocket motor (SRM) market. For years, the U.S. industrial base for these critical components was effectively a duopoly shared by Northrop Grumman and Aerojet Rocketdyne, which L3Harris acquired in 2023. This limited competition and capacity, a vulnerability laid bare by the surge in munitions demand following the war in Ukraine and other global tensions.

The supply chain for SRMs is notoriously complex and brittle. Key chokepoints include limited suppliers for specialized components like nozzles and casings, as well as a fragile supply of energetics—the highly specialized chemicals used to create propellant. The sudden failure of a single sub-tier chemical supplier in 2025 sent shockwaves through the industry, highlighting the systemic risk.

The crisis has forced major prime contractors, who are the end-users of SRMs, to scramble for solutions. Both Lockheed Martin and Raytheon have recently announced their own strategic partnerships—with General Dynamics and Italian manufacturer Avio, respectively—in an effort to secure and diversify their motor supply. The entry of new players like Anduril Industries and Ursa Major is also being encouraged by the DoD to foster a more resilient, multi-player market. L3Harris’s move to spin off and supercharge its Missile Solutions business is the most significant effort to date to directly tackle the production shortfall at its source.

Financial Engineering Meets National Imperative

For L3Harris, the transaction is a strategic masterstroke, aiming to “unlock meaningful value” for its shareholders, the company, and the warfighter. By spinning off the Missile Solutions business, L3Harris creates a specialized entity that can attract dedicated talent and capital. A pure-play propulsion company is often more attractive to a certain class of investors than a sprawling, diversified defense conglomerate.

Following the IPO and the DoD’s investment, L3Harris will retain a controlling interest in the new company, allowing it to continue benefiting from its growth while sharpening its own strategic focus as a 'Trusted Disruptor' in broader defense technology. The plan builds on significant investments L3Harris has already made since acquiring Aerojet Rocketdyne to modernize production, automate manufacturing, and shore up the supply chain at facilities like its key plant in Camden, Arkansas.

The DoD’s $1 billion investment will serve as a powerful catalyst, enabling the new company to accelerate these expansion plans and scale production at a pace that private capital markets alone might not support. This hybrid funding model could become a template for addressing other critical shortfalls in the defense industrial base, from microelectronics to shipbuilding.

Powering America's Premier Missile Systems

The tangible impact of this expansion will be felt across the U.S. military's most critical missile stockpiles. The increased production of solid rocket motors is essential for sustaining and growing inventories of key defensive and offensive systems. These include:

• PAC-3 (Patriot Advanced Capability-3): A cornerstone of theater air and missile defense.
• THAAD (Terminal High Altitude Area Defense): A crucial system for intercepting ballistic missiles.
• Tomahawk and Standard Missile: Workhorse systems for the U.S. Navy, providing long-range strike and fleet air defense.

The ability to produce these systems' propulsion units at speed and scale is fundamental to U.S. national security and its ability to support allies. The DoD's direct investment underscores a recognition that the health of the industrial base is no longer a secondary concern but a primary component of military readiness. As this new missile company prepares to enter the public market, its performance will be watched closely not only by Wall Street, but by military planners in Washington and capitals around the world. The success or failure of this venture will likely set the course for the nation's defense industrial strategy for years to come.