Industry Week in Review – September 6, 2013
As in 2013, Congress is not expected to pass a defense budget by the end of the government fiscal year on September 30, but instead enact a temporary continuing resolution (“CR”) to fund the entire government at spending levels comparable to the previous fiscal year. In response, Pentagon officials are asking for flexibility in meeting Congress’ spending cap, which the Pentagon’s 2014 budget proposal currently exceeds by $52 billion. Rather than focusing on eliminating certain programs, officials are hoping to reduce investment and increase efficiency in certain programs. Typically under a CR, starting new programs and adjusting program investment levels are prohibited.
Last year, the Pentagon furloughed most civilian employees, decreased training, and delayed deployments to meet spending caps. For 2014, a similar reduction in civilian work force will likely be a component in meeting spending caps. While the need for reduction is uncertain until the enactment of the CR, officials are hopeful they will not have to resort to furloughs again in the coming fiscal year.
Big Movers
SAIC Inc. (Down 4.6%) – Shares were down this week after the Company announced second quarter earnings results below analyst estimates and subsequently decreased its fiscal 2014 outlook.
The Timken Company (Up 9.7%) – Shares were up this week after the Company announced it will spin off its specialty steel making division into a separate stand-alone company.
Relevant Transactions
Alliant Techsystems, Inc. (“ATK”) to acquire MidOcean Partners’ Bushnell Group Holdings, Inc.,a provider of branded sports optics, outdoor accessories, and performance eyewear, for $985 million in cash. ATK will use the acquisition to expand the offerings and capabilities of its Sporting Group division as well as enter new markets.
Marshall Aerospace and Defence Group acquired Hawker Beechcraft Limited, European MRO Business Unit, a provider of maintenance, modification, paint, and upgrade services to Hawker and Beechcraft aircraft. Marshall will use the acquisition to strengthen its civil aerospace business and increase its offerings to the business and commercial aviation marketplace.
