Industry Week in Review – April 3, 2015
Aerospace & Defense Update
On Tuesday, President Obama lifted a freeze on arms transactions with Egypt, marking a significant step towards repairing relations with the Middle East nation during a period of regional instability. The decision to remove the arms freeze, which had been in place since October 2013, provides an additional source of foreign military sales for American weapons manufacturers that have faced defense spending caps and budget cuts domestically. Notably, in the near term, the change in policy will free up the delivery of 12 Lockheed Martin F-16 aircraft, 20 Boeing Harpoon missiles, and as much as 125 General Atomics M1A1 Abrams tank kits previously paid for by the Egyptian government. Moreover, Obama pledged to support providing Egypt with $1.3 billion in foreign military assistance, which would make the country the second largest recipient of U.S. military aid.
In an investor meeting last month, United Technologies Corporation’s (“UTC”) CEO, Greg Hayes, indicated that the Company is considering a spinoff of its Sikorsky Helicopter subsidiary. This week, in a move that could help set the stage for a possible divestiture, UTC appointed Robert Leduc as president of the helicopter manufacturer. Prior to his retirement last year, Leduc served 35 years with UTC Aerospace Systems, Pratt & Whitney, and Hamilton Sundstrand. His years of experience and familiarity with UTC position him as an ideal candidate to lead Sikorsky through a steady transition, should it in fact be spun off.
Government Technology Solutions Update
President Obama issued an Executive Order this week giving the Secretary of the Treasury, in conjunction with the Attorney General, and Secretary of State, the power to impose sanctions against individuals or organizations who launch cyberattacks posing a significant threat to national security. This order follows the issuance of financial sanctions against North Korea for the cyberattack against Sony pictures. According to Michael Daniel, the White House Cybersecurity coordinator, the Sony incident highlighted the need for the U.S. to be able to more directly target the parties, as opposed to the countries, involved in attacks. Sanctions imposed by the Secretary of the Treasury would seize U.S. funds of named parties and ban individuals and corporations alike from the U.S. financial system. President Obama’s Executive Order seeks to provide an additional tool to combat cyberattacks as cybersecurity is a new and quickly emerging mission for most Federal agencies. Similar to the recent creation of the Cyber Treat Intelligence Integration Center (“CTIIC”) and the current drafting of cyber information sharing bills by the House and Senate, the cyber executive order is part of a large initiative to keep the U.S. on the forefront of cybersecurity.
Big Movers
AAR Corp. (Down 7.1%) – Shares were down this week after the Company announced 3Q15 net loss of $0.89 per sharem, compared to net income of $0.45 per share in the same period last year.
Senior plc (Up 6.0%) – Shares were up this week after the Company announced its acquisition of Lymington Precision Engineers Co Ltd.
Transactions
TransDigm Group, Inc. acquired Franke Aquarotter GmbH’s Aerospace business, a manufacturer of proprietary faucets and related products for use on commercial transports and regional jets. The deal is worth approximately $75 million.
Senior plc acquired Lymington Precision Engineers Co Ltd, a pf precision machined components, fabrications, assemblies, and kit sets. The deal is worth approximately $150 million.
COM DEV International Ltd. to acquire Pacific Wave Systems, a provider of waveguides for the global satellite industry. The deal is worth approximately $20 million.
ITT Corp. acquired Hartzell Aerospace, a provider of highly engineered and customized solutions for aerospace environmental control systems on a wide range of high-growth, next-generation aircraft platforms. Terms of the deal were not disclosed.
NATEL Engineering Company to acquire OnCore Manufacturing, LLC, a provider of product commercialization services for low-medium volume, high-complexity products to blue-chip aerospace and defense, industrial, and medical companies. Terms of the deal were not disclosed.
Centerra Group, LLC acquired Gregg Protection Services, Inc., a provider of protection services for nuclear, biological, and national security assets. Terms of the deal were not disclosed.
SRA International acquired Qbase’s Government Services Business, a provider of software products and services supporting customers in the intelligence, national security, Government, healthcare, and energy arenas. Terms of the deal were not disclosed.
CACI International acquired LTC Engineering Associates, Inc., a provider of technical engineering solutions and services to the intelligence community and Department of Defense in the areas of software engineering, cybersecurity, signals intelligence, communications intelligence, and digital signals processing. LTC Engineering generated $16 million in revenue in FY2014.
