Industry Week in Review – January 8, 2016
Aerospace & Defense Update
Lockheed Martin secured a $5.3 billion contract to deliver 78 C-130J Super Hercules aircraft to the U.S. armed forces from 2016 through 2020. The C-130J aircraft, one of the longest-running military aircraft programs, is a versatile tactical airlifter used in many different types of missions for the U.S. Air Force, Marine Corps, and Coast Guards. The contract is primarily for the Air Force, which will receive 72 out of the 78 aircraft, with the remaining six provided to the Marine Corps. This is the second multi-year contract Lockheed Martin has been awarded to provide C-130Js, with the first one coming from 2003 – 2008 for 60 C-130J aircraft to the U.S. armed forces. The announcement is a major victory for Lockheed Martin, especially after worries in 2015 that a potential long-term continuing resolution could cause the Air Force to cancel the deal. Looking ahead, Lockheed Martin is eager to provide the C-130J to France, which has indicated the intent to purchase four C-130Js at an estimated $650 million.
BOC Aviation, the aircraft-leasing arm of Bank of China, ordered 30 Airbus A320 narrow-body jets valued at $3.1 billion (at list prices), comprising of 18 A320neo and 12 A320ceo aircraft. The order is part of the company’s initiative to increase its fleet ahead of its expected 2Q16 $3 billion initial public offering, having previously ordered 22 Boeing 727s only two months ago. The company is witnessing strong demand, as Asia continues to be one of the fastest growing regions for airlines, with capacity more than doubling since 2010. Robert Martin, BOC Aviation’s CEO, stated the order underscores their confidence in the reliability and popularity of the A320 family. However, Airbus recently announced that it had fallen short of its goal to deliver the first A320neo at the end of 2015, citing documentation issues for the delay. That being said, the delay will have negligible financial impact and Airbus expects to deliver the first A320neo within the next few weeks.
Government Technology Solutions Update
The National Institute of Health and Information Technology Acquisition and Assessment Center (“NITAAC’”) lowered contract fees on its three Government Wide Acquisition Contracts (“GWAC”) this week. CIO-SP3 fees decreased from 1.00% to 0.65%, CIO-SB3 fees decreased from 0.79% to 0.55%, and CIO-CS fees decreased from 0.50% to 0.35%. As IT acquisition processes become more efficient and streamlined, pressure has been increasing on Federal customers to lower fees while offering access to targeted IT solutions. These fee reductions highlight an increasingly competitive GWAC market between NITAAC, NASA, and the General Services Administration (“GSA”), as agencies lower fees to better align costs with GWACs from other government entities.
The Interior Department (“DOI”) became the first Federal department to transition its financial management system to the cloud, completing the migration of its SAP and Compusearch systems on January 5th. Unisys and Virtustream aided DOI, and will manage the accounting infrastructure of the department post-transition. The transition comes as DOI strives to complete its five-year IT modernization plan from 2011. It also marks a milestone in the broader Federal IT cloud-migration effort, which seeks to promote Federal agency adoption of the cloud to increase government efficiency and cost savings.
Big Movers
The Boeing Company (Down 10.1%) – Shares were down this week as macroeconomic trends outweighed the news that the company reported a record number of deliveries in 2015
BAE Systems (Up 2.5%) – Shares were up this week as tensions between Saudi Arabia (BAE’s third largest customer) and Iran escalated to high levels, potentially increasing future demand for the company
Transactions
Mitcham Industries Inc. acquired L-3 Communications Klein Associates Inc., a designer, developer, and manufacturer of sonar equipment, and waterside security and surveillance/maritime domain awareness systems. The deal is worth an estimated $10.0 million.
Royal Adhesives & Sealants, LLC acquired Adhesive Systems Inc., a developer, manufacturer, and marketer of engineered adhesives and application solutions for aerospace, aviation, military, and many other applications. The terms of the deal were not disclosed.
Intel Corp. acquired Ascending Technologies GmbH, a developer and manufacturer of autopilot systems, unmanned aircraft systems, and multi-rotor technology for professional, commercial, civil, and research Unmanned Aircraft System (“UAS”) applications. The terms of the deal were not disclosed.
Spanawave Corporation to acquire multiple product lines of Giga-Tronics, Inc., a manufacturer of power meter, amplifiers, sensors, and signal generator products for defense electronic and aeronautic applications. The deal is worth an estimated $1.5 million.
Ascent Aerospace to acquire Gemcor II, LLC, a developer and manufacturer of automated fastening systems that are used by airframe manufacturers throughout the world. The deal is worth an estimated $44.0 million.
SCST, Inc. acquired Talentscale, LLC, a provider of aircraft maintenance and logistic services. The terms of the deal were not disclosed.
Phoenix Logistics acquired Silverado Cable Co., a provider of aerospace manufacturing services. The terms of the deal were not disclosed.
Sage Capital, LLC acquired DIT-MCO International Corporation, a provider of electronic test equipment and automated wiring analyzers for commercial and military aircraft, defense communications, and weapon systems. The terms of the deal were not disclosed.
Industry Armament acquired Predator Tactical, LLC, a provider of custom firearms and training solutions for the military, law enforcement, and civilian markets. The terms of the deal were not disclosed.
System One acquired Alta IT Services, a provider of IT consulting services to Federal customers. Terms of the deal were not disclosed.
