L3Harris Technologies has agreed to sell a majority stake in its space propulsion and power systems unit to AE Industrial Partners in an $845m transaction.

The deal involves the sale of an approximately 60% stake and includes debt. L3Harris said the transaction advances its strategy to reduce exposure to space activities and concentrate resources on defence capabilities, as governments increase military spending amid geopolitical tensions.

Alongside the sale, L3Harris announced a reorganisation of its operating structure, reducing its business segments to three from four. The new structure will comprise space and mission systems, communications and spectrum dominance, and missile solutions. Chief executive Christopher Kubasik said the changes would better align the company’s portfolio with what he described as “the future of warfare”.

Despite the divestment, L3Harris will retain sole ownership of the RS-25 rocket engine, which is currently used on NASA’s Space Launch System for the Artemis programme. The company said this asset remains strategically important despite the broader shift away from space propulsion systems.

AE Industrial said its partnership with L3Harris would support the development of next-generation propulsion technologies, including nuclear propulsion, which it described as critical to future space exploration, including missions to Mars. The private equity firm has previously invested in space and defence-related assets, including Firefly Aerospace, RedWire Space, and York Space Systems.

The transaction, first reported by Reuters, is expected to close in the second half of 2026. The deal highlights continued private equity interest in specialised aerospace and defence assets, particularly carve-outs where corporate sellers seek strategic refocusing while retaining exposure to select core technologies.

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