Industry Week in Review – April 24, 2015
Aerospace & Defense Update
The House Armed Services Committee (“HASC”) began its markup of the National Defense Authorization Act this week to be completed by April 29th. The HASC is in the process of marking up the following four sections; tactical air and land forces, military personnel, seapower and projection forces, and strategic forces, in that order. There has already been word that the seapower and projection forces section has distinct verbiage demanding oversight of the Air Force’s Long Range Strike-Bomber (“LRS-B”) program. A detailed review of the overall acquisition strategy, technology design, development and testing status, cost and schedule implications, and more is set to be due by March 1, 2016. This oversight, led by the comptroller general’s office, will attempt to ensure the Pentagon follows through with its promise of affordability as it is projecting a $550 million per-unit cost in 2010 dollars for the LRS-B.
Following a period marred with profit uncertainty, a failed acquisition, and layoffs, Rolls-Royce has announced yet another executive shift with the retirement of Chief Executive Officer, John Rishton, to be replaced by Warren East, prior chief of ARM Holdings. East lead the microchip supplier from 2001 to 2013 where exhibited an ability to drive growth for the Company and has also held a position on the board of Rolls-Royce serving as a nonexecutive director and chairman of the Science & Technology Committee. This shift follows the retirement of Mark Morris, Chief Financial Officer, and James Guyette, head of the North American division. Guyette will be replaced next month by Marion Blakey, former U.S. Federal Aviation Administration chief. To round out these moves, the Company also appointed Tom Wood, a relative veteran within the Company to head the Aerospace unit.
Government Technology Solutions Update
The House of Representatives passed the Protecting Cyber Networks Act (“PCNA”) by a 307-116 vote on Wednesday, which will strengthen digital defenses of American consumers and businesses. The PCBA is the first of three bills to pass related to cyber information sharing laws. The goal of these laws is to increase the flow of cybersecurity information between public and private sectors. Government officials and most industry groups believe the exchange of data will be beneficial to both sides in order to understand attacks and strengthen network defenses. However, privacy advocates and some lawmakers have voiced concern over the sharing of sensitive information. To ease these concerns, the House also adopted an amendment to the PCNA requiring the inspector general to report how personal information is removed from shared data.
The Defense Information Systems Agency’s (“DISA”) reorganization at the beginning of the year focused on transformational efforts around the “five C’s” – cyber, cloud, collaboration, command, and control. Much of the emphasis on cybersecurity is now being led by the Infrastructure Development Directorate, a component of the Development and Business Center. The directorate oversees DISA’s most prominent cyber initiatives and investments, and also houses active opportunities for cybersecurity vendors. Within the directorate, the Infrastructure Software Services Division is responsible for cloud services, the Cyber Security Division focuses on end point security and configuration management, and the Cyber Situational Awareness and Analytics Division addresses the need to maintain and improve network awareness.
Big Movers
Zodiac Aerospace (Up 13.3%) – Shares were up this week after the Company released earnings for the first half of its 2014 / 2015 fiscal year. Revenue increased by 16.3% to €2,324.1, driven by 19.8% growth in its aircraft interiors segment.
BAE Systems plc (Up 1.9%) – Shares were up this week after the Company announced that it is considering exiting some of its U.S. based information technology businesses including its U.S. manpower and services IT business which has generated external interest.
Transactions
Sierra Nevada Corporation acquired Kutta Technologies, Inc., a provider of high reliability mission-critical software and systems. KippsDeSanto & Co. advised Kutta Technologies, Inc. on the deal of which terms were not disclosed.
G/Force. Inc. acquired Tri Star Engineering, Inc., provider of technical support services to NSWC Crane and other Department of Defense agencies. Terms of the deal were not disclosed.
Amphenol Corporation acquired RG Industries LLP’s Invotec Group Ltd., a manufacturer of time-critical and technologically complex HDI, Flex and Flex-Rigid printed circuit boards for the defense, aerospace, industrial, security, and transportation markets. Terms of the deal were not disclosed.
Raytheon to acquire Websense Inc., a provider of cybersecurity solutions to protect data and users from cyber threats, malware attacks, information leaks, legal liability, and productivity loss worldwide. Websense is a portfolio company of Vista Equity Partners LLC. The deal is valued at $1.9 billion, net of cash, and will be combined with Raytheon’s’ cybersecurity unit.
KPMG acquired Triad Technology Partners’ ServiceNow Professional Services Organization, a provider of enterprise IT cloud tools to Federal and Intelligence clients. Terms of the deal were not disclosed.
