Industry Week in Review – July 19, 2013
During a visit to Jacksonville Naval Air Station on Tuesday, Defense Secretary Chuck Hagel discussed a 20% staff reduction within the offices of high ranking officials and senior civilians at the Pentagon from 2015 to 2019. Hagel provided limited details on the cuts, but explained that they would apply to the Office of the Secretary of Defense, the offices of the Chairman of the Joint Chiefs of Staff, and the Pentagon headquarters of the Army, Navy, Air Force, and Marines. Although the estimated 3,000 to 5,000 job cuts only address a small fraction of the 2.1 million Department of Defense (“DoD”) jobs, the trimming of upper branches within the DoD is a strong indication of the scope of future personnel reductions, as these areas have previously been resilient to cutbacks. Later Tuesday evening, Pentagon Press Secretary George Little released a statement explaining that the cuts arose from the comprehensive Strategic Choices and Management Review earlier this year and that they will be implemented regardless of whether or not Congress removes sequester-level budget caps. Little estimated that the personnel cuts, which will target both civilian and contracted employees, could save the DoD up to $2 billion over the five year period. The specific positions and exact number of jobs to be eliminated will be determined following a comprehensive review of each office and will be included in the FY15 budget request, scheduled to be released next February.
AeroVironment, Inc. (Up 10.8%) – Shares were up for the week after Engaged Capital LLC announced that it has taken stake in roughly 5.1% of the company’s stock.
SAAB AB (Down 7.6%) – Shares fell this week following the company’s release of its 2013 profitability forecast. SAAB’s original projection of EBIT margins around 7.7% declined to 6.6% due to shrinking defense markets.
EDAC Technologies, a Greenbriar Equity Group portfolio company, acquired Parkway Products, Inc.’s Aerospace & Defense business, a manufacturer of aerospace composites. The transaction broadens EDAC’s manufacturing, engineering, and design capabilities to meet growing demand. The terms of the deal were not disclosed.
Colt Defense LLC acquired New Colt Holding Corp., the parent company of Colt’s Manufacturing Company LLC for an undisclosed amount. The acquisition of a leading civilian and sporting firearms manufacturer supports Colt Defense’s expansion into the commercial firearm market.