Industry Week in Review – September 19, 2014
Aerospace & Defense Update
Airbus Group has announced that after a detailed and comprehensive portfolio assessment, it will divest some of its subsidiaries and business units within its defense and space division. These divestitures will include Fairchild Controls, Rostock System-Technik, AvDef, ESG, and Atlas Elektronik. The aerospace and defense conglomerate may also consider divesting its commercial and para-public communication business. The move will further develop the defense and space division just a year after Airbus combined the two units. Focus will shift to industrial alternatives as a means for the division’s security and defense electronics businesses and for future growth.
Timken Co. has also announced that it will restructure its aerospace business. In efforts to improve performance, Timken will eliminate the management structure for that business and seek a buyer for its aerospace MRO parts business. Specifically, Timken will close an engine repair and overhaul operation in Arizona and an aerospace bearing plant in England. The company will continue to explore ways to streamline operations and generate growth.
Government Technology Solutions Update
This past week, both the House and the Senate passed a Continuing Resolution (“CR”) to keep the Federal Government open until December 11, 2014. The bill includes an amendment to authorize the training and equipping of Syrian rebels to fight the Islamic State of Iraq and the Levant and has several provisions to address other current key issues; however, it does not address budget decisions for individual government agencies. Additionally, the bill does not block the one percent pay raise for government workers in 2015.
A recent report released by Deltek has found that Federal agencies are increasingly relying on indefinite delivery / indefinite quantity (“IDIQ”) contracts to accomplish their technology and policy goals. The Federal Information Technology Task Order Vehicle Trends report found that 50% of IT dollars from 2010-2013 were spent via IDIQ task orders. For government contractors, IDIQs can often provide longer-term revenue streams and more predictable scopes of work. However, the increased use of task order contracts has also lengthened pre-request for proposal and post-award timelines, as a result of agencies honing in on required capabilities and award protests.
Big Movers
API Technologies Corporation (Up 8.8%) – Shares were up this week after the Company announced that it has been awarded a new patent for antenna technology for GPS and asset tracking applications.
TASER International, Inc. (Down 12.5%) – Shares were down this week following an insider trading allegation.
Relevant Transactions
Valence Surface Technologies, portfolio company of Thrive Capital, acquired Blue Streak Finishers, a provider of processing and related services for large complex aerostructures. Terms of the deal were not disclosed.
Charlesbank Capital Partners acquired HDT Global, a provider of solutions for government, military, commercial, and industrial customers, from Metalmark Capital. Terms of the deal were not disclosed.
Cobham plc completed its acquisition of Aeroflex Corporation, the transaction, previously announced on May 20th, has now successfully closed. The deal is worth an estimated $1.46 billion.
