Carlyle Group joined JPMorgan Chase and Andreessen Horowitz in a more than $1bn funding round for defence technology company Castelion, according to Private Equity Wire. The California-based startup said the Series C financing values it at approximately $13bn.
Round Structure
The round comprises about $800m of equity alongside a $250m revolving credit facility and includes a number of other venture capital investors. JPMorgan has established a $10bn investment vehicle as part of a broader national-security initiative. Andreessen Horowitz was an earlier investor in Castelion.
Use of Proceeds
Castelion plans to use the capital to accelerate production of its Blackbeard hypersonic missile, while also funding development of a larger hypersonic strike system and a missile designed for mass-produced air defence. The company has already invested roughly $250m in a manufacturing campus in New Mexico dedicated to producing Blackbeard and is looking for an additional site to manufacture future weapons systems. Management has also begun work on a longer-range hypersonic platform intended to address US military requirements in the Pacific. The company has chosen to invest in development ahead of securing a formal Pentagon contract.
Investor Rationale
For Carlyle, the investment marks a further expansion of its exposure to the defence sector. Ian Fujiyama, who leads the firm’s aerospace, defence and government practice, said the firm was attracted by Castelion’s ability to develop and manufacture weapons on significantly shorter timelines than traditional defence contractors. Carlyle sees a long-term opportunity to invest in rebuilding defence manufacturing capacity that has diminished over several decades, particularly in areas such as munitions and hypersonic weapons. The investment comes as governments and defence departments seek to rebuild munitions capacity and develop weapons capable of countering increasingly sophisticated military systems, according to Private Equity Wire. The conflict in Ukraine has put pressure on Western missile inventories, while heightened demand for air-defence systems has added to concerns over available stockpiles.
Company Background
Castelion was founded by three former SpaceX employees with the aim of accelerating the design, testing and manufacture of military hardware compared with the longer development cycles associated with established contractors, according to Private Equity Wire.
