Industry Week in Review – June 3, 2016
Aerospace & Defense Update
Intended to replace the Hellfire missile, a Joint Air-to-Ground Missile (“JAGM”) was successfully fired from a Gray Eagle unmanned aircraft system and hit its target, a truck traveling at twenty miles per hour. According to the U.S. Army’s Joint Attack Munition Systems project manager, this is the first time the JAGM missile has been tested on a drone. Compared to the Hellfire missile, the JAGM missile is not highly dependent on operator skill or latency of the Predator platform. The missile is currently being developed under Lockheed Martin’s $66 million contract for JAGM missile engineering and manufacturing development with two $60 million options for initial production.
Britain is in the initial stages of creating a new era of space-based tactical communications for its military that will replace the current Airbus Skynet 5 system scheduled to end in 2022. The Future Beyond Line of Sight (“FBLOS”) program would replace the Ministry of Defense’s (“MoD”) current twenty-year deal with Airbus Defence and Space started in 2003 to provide and support satellite, ground terminals, and control rooms. The world’s largest satellite builders and service providers, including Airbus, Boeing, and Lockheed Martin, have expressed interest in the upcoming contract, which will likely have several awardees. Executives competing over the contract believe many new technologies such as solar-powered UAVs and data transmission by laser will emerge over the next decade, thus emphasizing the need for further innovation.
Government Technology Solutions Update
According to officials from the Center for Medicare and Medicaid Services (“CMS”), big data and predictive analytics tools used to fight Medicare fraud have saved taxpayers approximately $1.5 billion dollars over the past five years. These tools are part of CMS’ Fraud Prevention System (“FPS”), which the agency began using in June of 2011 and runs sophisticated analytics for approximately 4.5 million daily Medicare claims. FPS’ applications allow CMS to go “beyond the reactive ‘pay and chase’ approach toward a more effective, proactive strategy that aims to prevent these illegitimate payments in the first place,” explained CMS officials. It is estimated that in 2015, CMS saw a return of $11.60 on every dollar invested in FPS, and as a result is currently working to develop next-generation predictive analytics to further improve the efficiency of mission-critical system.
In an effort to diminish cybersecurity risks within its internal computer systems, Department of Defense (“DoD”) CIO Terry Halvorsen laid out the agency’s new “Cybersecurity Discipline Implementation Plan.” The comprehensive plan highlights four courses of action and includes the use of a new scorecard to ensure that the DoD is adequately strengthening its cybersecurity defenses. Each course of action pertains to a unique area of cybersecurity that hackers have exploited to gain access to the agency’s network. The Defense Readiness Reporting System, another component of the plan, enables supervisors to report their status on meeting these requirements and allows “leadership to review compliance down to a tactical level,” the plan explains.
Big Movers
Zodiac Aerospace (Up 7.3%) – Shares were up this week as the Company reported new business from United Airlines’ upgraded business class seats.
Cobham (Down 16.0%) – Shares declined after the defense group announced a $700m rights issue that allows its investors to purchase shares at a significant discount of 45% to the closing price in order to raise capital to pay off debt.
Transactions
Aerostar Aerospace Manufacturing, LLC acquired Warmelin Precision Products, a provider of highly complex precision components for the global aerospace industry. Terms of the deal were not disclosed.
Genstar Capital, LLC acquired Infinite RF Holdings, Inc., a provider of engineering grade radio frequency (RF) technology components to the aerospace/defense, industrial, government, consumer electronics, instrumentation, education/medical, and telecommunications markets. Terms of the deal were not disclosed.
Saint Gobain Performance Plastics Corporation acquired MIPNET Industries, a provider of composite parts designed with the RT2iTM weaving technology to aerospace industry. Terms of the deal were not disclosed.
United Flexible, Inc. to acquire Kreisler Manufacturing Corp., a provider of precision metal components and assemblies primarily for use in military and commercial aircraft engines, and industrial gas turbines in the United States. The deal is worth an estimated $35 million.
