By Irene Klotz
CAPE CANAVERAL, Fla (Reuters) – - United Launch Alliance (ULA), the biggest supplier of rockets for the U.S. military, will ramp up rocket engine work with Amazon.com Inc <AMZN.O> founder Jeff Bezos' space company, the companies said on Thursday.
The move comes as ULA, a partnership of Lockheed Martin Corp <LMT.N> and Boeing Co <BA.N>, is considering a $2 billion cash buyout offer from Aerojet Rocketdyne Holdings <AJRD.N>, sources familiar with the matter told Reuters.
Aerojet also is developing an alternative engine for ULA's next-generation rocket, called Vulcan.
ULA and Bezos' space company, Blue Origin, said last year the companies would jointly develop a liquid natural gas-fueled rocket engine to replace the Russian-made RD-180 engines that currently power ULA's workhorse Atlas 5 booster.
ULA can no longer import the Russian engines for U.S. military launches, the bulk of its business, under a congressional ban enacted in response to Russia's involvement in Ukraine.
Aerojet is working on another engine, called the AR1, though its development is at least 16 months behind Blue Origin's BE-4, ULA Chief Executive Tory Bruno said at a congressional hearing in June.
ULA has a contract with Aerojet to use the AR1 as a backup if Blue Origin's development program stumbles.
ULA, Lockheed, Boeing and Aerojet have declined to comment about the reported buyout offer.
However, on Thursday ULA and Blue Origin said they had agreed to expand the production capabilities of the BE-4, which is targeted to make its debut flight in 2019.
"This new agreement is an important step toward building BE-4s at the production rate needed for the Vulcan launch vehicle," Bezos said in a statement.
Bezos is scheduled to be in Florida on Tuesday to unveil plans for its own rocket manufacturing plant and launch pad at Cape Canaveral Air Force Station, located just south of NASA's Kennedy Space Center. Blue Origin intends to use the BE-4 engine in its rockets as well as sell them to ULA and potentially other customers.
(Reporting by Irene Klotz; Editing by Richard Chang)