News & Events

Industry Week in Review – October 7, 2016


Aerospace & Defense Update

For the year through September 27th, Boeing has garnered 357 gross orders, a sharp decrease from 499 orders last year during the same time period.  The slowdown in orders has caused the Company’s book to bill ratio to drop to 0.5 compared to 0.7 during the same period last year.  Widebody sales have been most affected, with Boeing only procuring 59 gross orders through the end of September, while receiving 158 orders during the same time last year.  In order to reach a book to bill ratio of 1.0, Boeing needs 380 new orders by year-end to match likely deliveries of about 750 jets.  Contrary to analyst opinions, Boeing CEO, Dennis Muilenburg, maintains the situation is not a pressing issue and affirms that “we continue to trend towards a book to bill of about one.”

During the Association of the US Army conference (“AUSA”), Air Force Chief of Staff General David Goldfein stated that he expects repairs of the recently grounded F-35A to be completed by December. The Air Force grounded the joint strike fighter after a problem was found in coolant line insulation, which could ultimately lead to structural damage to the aircraft if not fixed.  Even though the General believes the problems for the F-35 are short term, this new repair marks yet another issue with a project for which costs have almost doubled the original program budget of $200 billion.  The Air Force also continues to investigate an incident on September 23rd when a F-35 erupted in flames during an engine startup.

Government Technology Solutions Update

According to inside sources, Harris Corporation has begun seeking a sale of its IT services business housed within its Critical Networks division.  It is estimated that such a divestiture might be worth as much as $500 million, according to industry insiders.  This move comes roughly two months after activist hedge fund Jana Partners LLC acquired a ~2% stake in the company in August.  At that time, there had been speculation that this move was an attempt on the part of Jana Partners to unlock value by identifying and shedding non-core or otherwise underperforming assets and businesses within the Harris umbrella.  This move would be one of the largest in a string of Harris divestitures in recent years, and highlights the trend of government contractors realigning strategic priorities by carving out certain business lines that are not believed to be critical to value creation for the parent company.

The U.S. Army completed 21 major upgrades to its IT infrastructure in 2016, with another 44 planned for completion within the next fiscal year.  The upgrades are a result of objectives aimed at consolidating the Army’s IT infrastructure while reducing fragmentation and unnecessary complexity in its organization.  According to officials, these upgrades were among the first modernization initiatives implemented Army-wide in over a decade.  By implementing these changes en masse, the government hopes to capture major cost saving via bulk procurement of critical IT products and services.  Future goals include the procurement of software-as-a-service (“SaaS”) solutions which would increase the mobility of soldiers, as well as the implementation of a more centralized, complete, and robust cybersecurity architecture.

Big Movers

Honeywell (Down 8.3%) – Shares were down this week after Honeywell lowered its third quarter earnings guidance.

TASER (Down 21.6%) – Shares were down this week after the New York Police Department awarded a five-year body-camera contract to a competitor.

Transactions

Accenture plc has agreed to acquire Defense Point Security, LLC, a provider of advanced cyber defense and response capabilities, cyber operations, cyber analytics, and security engineering for Federal government customers.  Terms of the deal were not disclosed.

Attain LLC has acquired ACF Solutions, a provider of cloud-based technology solutions and Salesforce customer relationship management (“CRM”) systems to education and nonprofit customers. Terms of the deal were not disclosed.

Calspan Holdings has acquired Triumph Aerospace Systems – Newport News, Inc., a provider of aerospace hardware and prototype systems for ground test and flight applications.  Terms of the deal were not disclosed.

Carlisle Companies, Inc. has acquired Star Aviation, Inc., a provider of design and engineering services, testing and certification work, and manufactured products for in-flight connectivity applications.  Terms of the deal were not disclosed.

Handy & Harman Ltd. has acquired ElectroMagnetic Enterprise, a provider of complex, custom engineered electric motors and generators, including a wide range of customized electromagnetic products.  The deal is worth $64.5 million.

L-3 Communications Corporation has acquired Aerosim Technologies, Inc., a provider of simulation-based training products for pilots as well as maintenance technicians in the aviation industry. Terms of the deal were not disclosed.

Micross Components, Inc. has acquired RTI International’s Microsystem Integration and Packaging (MIP) Group, a provider of value-added semiconductor processing services for government and commercial clients.  Terms of the deal were not disclosed.

MilDef AB has acquired The Rugged Computer Product Lines of American Reliance, Inc., a provider of rugged computers, providing COTS, modified COTS, and customized rugged solutions to the defense, industrial, and public safety sectors.  Terms of the deal were not disclosed.

MRO Holdings has acquired Flightstar Aircraft Services, a provider of heavy aircraft MRO services, including heavy maintenance and inspection services, as well as modification services for narrow body air transport aircraft. Terms of the deal were not disclosed.

QTS Realty Trust has acquired the government cloud business of VMware, an infrastructure-as-a-service, FedRAMP-compliant platform for the implementation of cloud storage solutions.  Terms of the deal were not disclosed.

Winchester Electronics Corporation has acquired Tekna Seal, LLC, a provider of hermetically sealed connectors, glass-to-metal feedthroughs, lithium battery seals and ceramic-to-metal seals.  The deal is worth $10.5 million.

 

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