News & Events

Industry Week in Review – September 24, 2015


Industry Week in Review – September 24, 2015

Aerospace & Defense Update

BBA Aviation PLC (“BBA”) announced its plans to acquire one of its largest competitors, Landmark Aviation, for $2.07 billion from private equity firm The Carlyle Group. The acquisition represents BBA’s big bet on a recovery in the U.S. business-jet market, following slow and steady recovery from the past couple of years, and its expectations for “accelerated growth” in the medium to long term for the sector. Although the transaction will bring together two of the world’s largest business-jet facility operators, BBA’s Chief Executive Simon Pryce believes it is unlikely to undergo regulatory hurdles since the market is still highly fragmented. Despite this acquisition, Mr. Pryce said BBA is open to additional deals, and is particularly vigilant on the European and Asia-Pacific markets to potentially expand business-jet servicing capabilities.

The Navy has delayed delivery of its newest aircraft carrier, the Gerald R. Ford, to late May 2016. Originally expected to deliver on March 31, 2016, the ship must first undergo further tests and trials. Commander Thurraya Kent, spokesperson for the Navy’s acquisition directorate, stated that any costs associated with the delays are being “managed within budget and below the [congressionally –mandated] $12.89 billion cost cap.” According to Kent, the ship is 93 percent complete, and will be the first of a new class of carriers that will replace the already-retired carrier Enterprise and the Nimitz-class carriers.

Government Technology Solutions Update

The Department of Homeland Security (“DHS”) recently awarded a contract with a ceiling value of up to $1 billion to protect agency networks. According to former government officials, the Development, Operations, and Maintenance program (“DOMino”) is aimed at maintaining and improving the intrusion and detection system known as EINSTEIN as well as other cyber tools. DOMino represents a new acquisition vehicle rather than a consolidation of previous contracts. The fiercely contested contract was awarded as part of the DHS’ evolving cyber strategy focused on developing an integrated system of intrusion detection, analytics, and information sharing. Due to its release from the classified DHS acquisition shop, public details are scarce; DOMino is a limited competition, five-year IDIQ contract. Raytheon was awarded the contract.

Despite optimism that Congress will reach a budget compromise by year-end, uncertainty has prompted many Federal agencies to review contingency plans in advance of the October 1st deadline. The Office of Management and Budget (“OMB”) is working with Federal agencies to prepare for the potential fallout of a government funding lapse, but is hopeful those plans will ultimately not be needed. Many agencies are forced to decide which programs are essential, and which employees will be needed to maintain operations. While Congress aims to reach a finalized agreement by the end of the fiscal year, the possibility of a continuing resolution provides some hope that a short-term funding bill would give Congress the additional time needed to negotiate a budget for the 2016 Government Fiscal Year.

Big Movers

Digital Globe (Down 19.2%) – Shares were down this week in response to profits underperforming expectations in the 1H15

Airboss of America (Down 15.5%) – Shares were down this week in response to weak macroeconomic trends

Transactions

Lauren International acquired Theiss UAV Solutions, a provider of homebuilt and ultralight aircraft for General Aviation. The terms of the deal were not disclosed

Honeywell International acquired Aviaso Inc., a provider of software solutions to the aviation industry. Terms of the deal were not disclosed.

Meggitt PLC to acquire EDAC Composites, a provider of highly engineered aerospace components used in jet engine and airframe applications. The deal is worth an estimated $340 million.

Veritas Capital to acquire GE Intelligent Platforms Embedded Systems, Inc., a supplier of open architecture computing and electronic systems for aerospace, defense, and industrial solutions. Terms of the deal were not disclosed.

BBA Aviation PLC to acquire Landmark Aviation, a provider of refueling and other ground services at airports. The deal is worth an estimated $2 billion.

CM Equity partners acquired Graco Supply & Integrated Services, a provider of adhesives, paints, coatings, and maintenance, repair, and overhaul products to the aerospace and industrial markets.

Red Aviation acquired DFW Instrument, a provider of critical aircraft flight instruments

Click here to review comparable company analysis.