Industry Week in Review – August 5, 2011
On Tuesday, August 2nd, the day the U.S. Treasury warned that it would run out of cash to meet its debt obligations, President Obama signed the deficit-reduction deal that finally raised the U.S. debt ceiling. The deal allows for a two-stage $900 billion debt increase in return for the promise of $917 billion in spending cuts over the next 10 years.
Additionally, a 12-member congressional committee, comprised equally of Democrats and Republicans, has until December 23rd to find and approve $1.5 trillion in further deficit reductions, in order for a second $900 billion debt ceiling increase to occur. If the committee fails to reach agreement, or the proposal is rejected, $1.2 trillion in spending cuts, taken equally from domestic spending and defense, will be triggered.
The Pentagon believes it will be able to meet the initial spending cuts called for in the debt-reduction deal ($400 billion over the next decade, based on the president’s budget submitted to Congress in February) but warned that deeper cuts could lead to civilian furloughs and program terminations.
Notes on some big movers:
SPX Corp. (Down 25.6%) – Shares fell Wednesday after 2Q11 earnings were released. Despite quarterly revenues up 16.4%, net income per diluted share this quarter was $0.62 compared to $1.40 same time last year. Free cash flow was down $19.1 million this quarter from last year due primarily to higher capital expenditures.
Embraer SA (Down 19.7%) – Shares fell this week amid an overall market downturn. Embraer stock closed today at $23.71, near its 52-week low of $23.37. The decrease was amplified by technical traders after the stock broke a $23.57 support level.
Notes on some relevant transactions:
Astrium N.V. to acquire Vizada SAS from Apax France, a French private equity fund, for $960 million, representing multiples of 10.1x EBITDA and 1.45x revenue. Vizada is a leading independent provider of global satellite-based mobility communication services. The acquisition marks a step towards the realization of Astrium’s parent company, EADS’, strategy to balance platforms with services, develop business in North America, and diversify its workforce.
Strategic Enterprise Solutions (“SE Solutions”), Inc. to acquire Evolution Technologies, Inc., a recognized leader in emergency and disaster process, systems support, and electronic information exchange. The addition of Evolution Technologies broadens SE Solutions’ mission capabilities and allows it to deliver services throughout its entire domain from the Department of Homeland Security to the first responder. The terms of the deal were not disclosed.
Andrew Redfern to acquire Lightning Aerospace, a Coventry engineering firm that provides laser and water jet material cutting, fabrication of steel and aluminum components and bespoke wire harnessing to the defense, commercial and aerospace sectors. Mr. Redfern, an aeronautical engineer and entrepreneur believes that his commitment to delivering on-going operational improvement will allow Lightning Aerospace to deliver higher levels of performance to its customers. The terms of the deal were not disclosed.
TransDigm Group Incorporated to acquire Schneller Holdings LLC, from an affiliate of Graham Partners, Inc., for approximately $288 million. Schneller Holdings designs and manufactures highly engineered laminates, thermoplastics, and non-textile flooring for use primarily on airplane side walls, lavatories, galleys, bulkheads and cabin floors. The acquisition will bring significant value creation opportunities through both the application of proven methodologies as well as a recovering commercial aerospace market.