Industry Week in Review – June 17, 2016
Aerospace & Defense Update
On Tuesday, the Senate approved the 2017 National Defense Authorization Act, which allocates $602 billion in base defense and war spending. The bill proposes aggressive acquisition reforms, which include reduced spending on cost-plus contracts and inclusion of more contractors outside the D.C., Maryland, and Virginia area (“DMV”) on Federal contracts. Additionally, it includes language to close the chief weapons buyer’s office in the Pentagon and transition the responsibilities to two new defense undersecretaries for innovation and acquisitions management. The Senate’s version of the bill is different from the version of the bill passed by the House in May primarily in its treatment of defense acquisitions reform and defense funding. After debate in conference, a finalized version of the bill will be sent to the White House for approval by the end of the government fiscal year on September 30th.
MBDA Missile Systems, a European missile manufacturer, is scheduled to conduct firings of its Brimstone 2 missile from a Boeing AH-64E to persuade the British Army to purchase the weaponry for a new helicopter fleet it is planning to acquire. Around the time of the Farnborough International Airshow, the British Army will announce whether it plans to buy the AH-64D under its foreign military sales or have Leonardo rebuild AH1’s to match the specifications of the AH-64E. MBDA is partially owned by three parent companies: Airbus Group, BAE Systems, and Leonardo (F.K.A. Finmeccanica). Currently, the British Army Air Corps uses Lockheed Martin’s Hellfire missile on its 49 AH1’s. While Hellfire missiles could potentially be in use until 2040, Lockheed is under a contract with the Department of Defense (“DoD”) to replace the Hellfire on Army Apaches and Black Hawks with the Joint Air-to-Ground Missile (“JAGM”).
Government Technology Solutions Update
The $900 million SOCOM Wide Mission Support (“SWMS”) contract has managed to make headlines again. Just a week after being awarded to six new companies as a result of bid protests the SWMS award is being protested again, this time by Alion Science and Technology. More bid protests are expected to come the Government Accountability Office’s way, as 17 companies submitted bids on the contract. The contract was awarded to Booz Allen Hamilton, CACI International, Raytheon Blackbird Technologies, and MacAulay-Brown in July of 2015 and subsequently awarded to ACADEMI Training Center, AECOM, ARMA Global Corp., Fulcrum IT Services, Jacobs Technology, and Raytheon Technical Services. The contract has a current period of performance extending through July 2020.
Symantec has agreed to acquire Blue Coat Inc. for approximately $4.65 billion in cash in order to better protect government and enterprise customers from cybersecurity attacks. Based in Silicon Valley, Blue Coat is a leading network technology, cloud, and security provider. As a result of the transaction, Symantec “will have the scale, portfolio, and resources necessary to usher in a new era of innovation designed to help protect large customers and individual consumers against insider threats and sophisticated cybercriminals,” explained Symantec chairman Dan Schulman. With the acquisition, Symantec will enhance its leadership position to define the future of cybersecurity. It will continue to set the pace for industry innovation. Blue Coat CEO Greg Clark will take the reins as Symantec’s CEO, as well as join the company’s board of directors. The combined company is projected to generate $4.4 billion in revenue for fiscal year 2016.
Big Movers
Comtech Telecommunications (Down 31.0%) – Shares were down this week after the company released the pricing for its previously announced public offering at $14 per share, well below the $16.11 share price before the announcement.
Safran (Down 6.5%) – Shares declined this week after the engine manufacturer announced its plans to bid for fellow French aerospace supplier, Zodiac Aerospace SA.
Transactions
Alpha Sintered Metals acquired Precision Products, LLC, a provider of metal injection moldings, serving the aerospace and firearms markets. Terms of the deal were not disclosed.
Carlisle Interconnect Technologies, Inc. acquired Micro-Coax, Inc., a provider of radio-frequency and microwave solutions for defense, satellite, test and measurement, and other industrial customers. Terms of the deal were not disclosed.
HGH Infrared Systems, Inc. acquired Electro Optical Industries, LLC, a provider of optronic and infrared systems for security, industrial, and civil applications. Terms of the deal were not disclosed.
ManTech International Corp. acquired Oceans Edge Cyber, the cyber business of Reston, Virginia-based Oceans Edge Inc. Oceans Edge Cyber focuses primarily on vulnerability research, development, and analysis. Terms of the deal were not disclosed.
Symantec to acquire Blue Coat Inc., a premier network technology and security provider based in Sunnyvale, California. Symantec will pay roughly $4.65 billion in cash for the transaction, which is expected to close in the third quarter of fiscal year 2016.
Xator acquired TSM Corporation, a Reston, Virginia-based national security solutions company which provides training, engineering and logistics services to Special Operations as well as Defense and Law Enforcement communities. Terms of the deal were not disclosed.
