Industry Week in Review – May 27, 2016
Aerospace & Defense Update
Vietnamese carrier VietJet Aviation announced it will order 100 Boeing 737 Max 200 jets worth an estimated $11.3 billion at list prices. VietJet is one of the fastest growing low-cost airlines in Southeast Asia, and previously only used Airbus A320’s since forming in December 2011. The planes are expected to be delivered between 2019 and 2023, with VietJet estimating strong growth in its aircraft fleet from the thirty-six it has today to more than 200 by the end of 2023. VietJet has roughly 40% of its domestic market and is expected to surpass Vietnam Airlines as the largest domestic airline this year. The order announcement was made on the same day President Obama made a visit to Vietnam, in which he lifted a forty-one year old arms embargo. Moving forward, the U.S. will help bolster and modernize Vietnam’s armed forces with military aircraft, missile and surveillance systems, and other weapon systems.
The 2016 European Business Aviation Convention & Exhibition (“EBACE”), which attracts manufacturers, business leaders, government officials, and flight department personnel within the business aviation industry, was held this past week in Geneva, Switzerland. Several original equipment manufacturers (“OEMs”) and their suppliers expressed their expectation of a flattish type environment for large cabin jets in the near term, which is largely due to slowing demand in emerging markets. Other news from EBACE revolved primarily around normal course product introduction updates, as there were no major order announcements made during the conference.
Government Technology Solutions Update
The General Services Administration (“GSA”) and U.S. Cyber Command (“CYBERCOM”) announced the awardees to its five year, $460 million cyber support contract. Of the 17 companies that submitted proposals, six companies were awarded spots on the contract, including the KEYW Corporation, Vencore, Inc., Booz Allen Hamilton, Inc., Science Applications International Corporation (“SAIC”), CACI, Inc. Federal, and Secure Mission Solutions, LLC (a subsidiary of Parsons Corporation). According to the award document, the contract will seek to encompass “a broad scope of services needed to support the U.S. Cyber Command mission.” In addition to the contract award, the first task order under the contract, which has an estimated value of $89 million, was awarded to Vencore, Inc. As a multi-award contract, this program marks a new acquisition approach for CYBERCOM that it hopes will speed acquisition times to more adequately address evolving cyber needs.
Hewlett Packard Enterprise (“HPE”) announced that it was spinning off and merging its enterprises services business with Computer Sciences Corp (“CSC”). The newly merged entity is expected to have $26 billion in annual sales. After splitting into two separate $50 billion entities less than a year ago, HPE has announced another transformational split as it spins off its enterprise services business. According to Meg Whitman, the CEO of HPE, the spinoff will allow HPE to focus on its core business areas and improve revenue growth, while CSC will benefit from increased scale, an important benefit when seeking work in an increasingly competitive, and consolidated, government services market. News of the transaction was unexpected by the Street, with HPE shares rising 13% to $18.40 and CSC shares increasing 31% to $46.66 after the announcement on Tuesday.
Big Movers
KeyW (Up 7.0%) – Shares were up this week after the company was awarded a prime position on a $460 million five-year multiple award contract to support the Cyber Command mission
Astronics Corporation (Up 6.1%) – Shares were up this week after the company received FAA approval to use its wireless Aircraft Interface Device (“AID”) on Boeing’s 737 aircraft
Transactions
D.C. Capital Partners acquired QRC Technologies, a provider of radio frequency test and measurement products. Terms of the deal were not disclosed.
FedData to acquire Intelligent Decisions’ Intelligence and Counterintelligence business units, a provider of critical infrastructure support services for Government and commercial organizations. Terms of the deal were not disclosed.
Hewlett Packard Enterprise Co.’s IT Services business to merge with Computer Sciences Corporation, a provider of IT and professional services, which recently divested its government services business. Terms of the deal were not disclosed.
KBR, Inc. to acquire Wyle, Inc., a provider of specialized engineering as well as professional, scientific, and technical services primarily to the U.S. Federal government. The deal is worth an estimated $570 million and is expected to add more than $800 million in annual sales.
TransDigm Group Incorporated to acquire ILC Holdings, Inc. (Data Device Corporation), a provider of power control and databus products to the global military and commercial aerospace markets. The deal is worth an estimated $1 billion.
