GenCorp Inc, a maker of aerospace propulsion systems, will pay $550 million for United Technologies Corp's Pratt & Whitney Rocketdyne unit, the two companies said on Monday.

The deal will almost double GenCorp's size, while allowing United Tech to pay down a portion of debt tied to its $16.5 billion acquisition of aircraft components maker Goodrich Corp .

The companies expect the deal, first reported by Reuters last week, to close in the first half of 2013.

Rocketdyne, the world's largest manufacturer of liquid-fueled rocket propulsion systems, has been facing an uncertain outlook following the end of the U.S. space shuttle program last year, and industry executives have said consolidation is needed for the space industry to survive a tough environment.

The sale comes more than seven years after United Tech bought Rocketdyne from Boeing Co for $700 million in cash.

Rocketdyne makes liquid rocket motors to launch satellites into space, but has also begun to diversify into solar and gasified coal energy technologies. GenCorp's Aerojet subsidiary and Alliant Techsystems Inc produce solid rocket motors.

Several people familiar with the process told Reuters previously that United Tech had received multiple bids for the Rocketdyne business in late March, with GenCorp and private equity firms among the interested parties.

Talks resumed in earnest with GenCorp after a prospective deal with a private equity buyer fell through, the people told Reuters.

Defense consultant Jim McAleese said the deal was significant because it would help preserve "a critical, but atrophying, capability since Rocketdyne's liquid rocket engines power both the Air Force's Evolved Expendable Launch Vehicle, and NASA's Manned Spaceflight."

He said he did not expect much objection to the deal since it would "immediately strengthen competition, by creating two strong competitors for liquid and solid rocket engines," the combined Aerojet-Rocketdyne business and Alliant Techsystems.

"This is exactly the type of modest consolidation that (the U.S. Department of Defense) has been publicly seeking to increase competition and reduce overhead, which could not be more timely given the growing threat of sequestration," McAleese said, referring to an additional $500 billion in defense spending cuts due to take effect in January.

GenCorp Chief Executive Officer Scott Seymour said the combined company would be better positioned for a highly competitive marketplace and could provide more affordable products to customers.

Shares of United Tech were down 1 percent at $73.50 in trading before the market opened.