Industry Week in Review – October 26, 2012
Doubts were cast on the potential Carlyle acquisition of Chemring this week after the British defense contractor announced that Chief Executive David Price would step down immediately, with former John Wood Group Plc executive Mark Papworth taking the helm on November 5. Some analysts have pointed to this sudden transition as a sign that the deal is collapsing, citing the odd timing of a leadership switch just before a potential transaction.
Like many defense firms, Chemring has faced declining budgets in the United States and Europe, resulting in a declining order book and lower profitability. This led to the company issuing a profit warning in August, just two weeks after it received an expression of interest from Carlyle. In a statement, Chemring touted Papworth’s achievements at Wood Group, citing the successful turnaround of the company and “substantial improvements in profitability.” A company spokeswoman has indicated that this decision reflects the board’s position that a leadership changes strengthens the company’s position. Carlyle has until November 9 to decide whether it will bid or not.
Big Movers
TASER International Inc. (Up 26.5%) – Shares are up this week after the company announced 3Q12 net sales of $28.7 million, an increase of $4.4 million or 18% compared to 3Q11. The increase in sales versus the prior year was primarily driven by the extended upgrade program for the TASER® X2™ Electronic Control Device.
Spirit AeroSystems Holdings, Inc. (Down 34.2%) – Shares were down this week after the company announced forward loss charges of $590 million for several programs including the 787, G650 Wing, and G280 among others. To address the charges in the quarter, the company successfully obtained the required lender consent to amend its senior secured loan and credit facility to adjust the senior secured leverage ratio through the first quarter of 2013 and the other financial covenant ratios through the second quarter of 2013.
Relevant Transactions
The Boeing Company acquired Miro Technologies, a provider of enterprise software solutions to manage maintenance, supply, repair, and performance based logistics for assets operating in air, space, sea, and ground environments. The acquisition provides Boeing with industry-leading MRO and PBL supply chain software capabilities.
TransDigm to acquire Goodrich Pump & Engine Control Systems, a developer and supplier of fuel pumps and controls to commercial and military helicopter OEM engine manufacturers. The acquisition expands TransDigm’s aftermarket product offerings for a number of engine applications.
EOD Technology to merge with Sterling International, providers of strategic stability operations support and integrated critical solutions for government and corporations worldwide. The two companies will form Sterling Global Operations, Inc., a company owned by its more than 1,000 employees.
Raytheon Co. acquired Teligy, a provider of custom software and hardware design, development, and testing services for commercial and defense systems. The acquisition enables Raytheon to cover the entire communication stack for both wired and RF technologies across all relevant platforms, and provides access to emerging markets.
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