News & Events

Industry Week in Review – August 10, 2018

By KDC

Industry Week in Review – August 10, 2018

Aerospace & Defense Update

The British Defense Security Organization reported that British defense companies secured exports valued at £9.0 billion ($11.6 billion) in 2017, recording a 53% increase over 2016 exports.  This is the nation’s second largest export success in the last decade and moved the UK to the third largest defense exporter in the world.  In line with positive trends, the United States achieved its highest market-share ever, estimated at 53% of global defense exports, with Russia following behind at 16% and the UK at 12% in 2017.  This increase in the global defense export market reflects uncertainties regarding on-going strategic threats, driving demand and rising prices in the sector.  The British air sector drove defense exports with notable equipment sales related to the F-35 strike jet program, Rolls-Royce engine sales to Germany, and work with Turkey on a possible next-generation fighter jet.

The Pentagon has sent Congress a report proposing a four-pronged approach for the U.S. military’s future in space that includes the creation of a Space Force as a sixth branch of the armed forces.  As Russia and China emerge as potential U.S. adversaries in space, the formation of a Space Force has increased in prominence.  The report’s first phase is the Department of Defense (“DoD”) would establish a Space Development Agency to develop and field space capabilities.  Next, the Pentagon would develop a Space Operations Force to support combatant commanders.  The third prong is the DoD would create the governance, services, and support functions of the Space Force to be approved by Congress.  And finally, the Pentagon would create the U.S. Space Command, led by a four-star general.  The DoD recommends that the president revise the plan to create the new U.S. Space Command by the end of 2018 and evaluate the need for any additional personnel and budget elements by then.

Government Technology Solutions

The Joint Enterprise Defense Infrastructure (“JEDI”) contract continues to be a hot topic of discussion within the government contracting space, given that the contract – which has a $10 billion ceiling value over 10 years – is expected to be single award.  As a result, many industry groups have not shied away from criticism of the Department of Defense (“DoD”).  Of particular note, Oracle filed a pre-award protest with the General Accountability Office (“GAO”) on Monday.  The nature of Oracle’s protest revolves around whether the DoD is acting reasonably and in accordance with procurement laws by looking to make a single award, given the size and nature of the JEDI contract.  With the GAO’s 100-day window to review the protest, this latest development could impact JEDI’s expected September bid due date.

In the latest development of the U.S.-China trade war, China announced it would place a 25% retaliatory tariff on approximately $16 billion worth of U.S. imports.  The announcement follows a recent announcement by the U.S. listing approximately $16 billion of Chinese goods that will be tariffed.  This latest development brings the total amount of Chinese goods that face tariffs in the U.S. to $50 billion, in the wake of U.S. President Donald Trump’s instruction to the U.S. Trade Representative Office to consider tariffing up to $200 billion in Chinese products.  China’s most recent tariff announcement targets U.S. passenger cars, motorcycles, medical instruments, materials, and waste products, among others, in a move meant “to defend the nation’s dignity”, per a Chinese state media report.  These updated tariffs have already had severe impacts on the U.S. and Chinese markets as the Chinese Yuan fell 6% to the U.S. dollar and Qualcomm lost a merger opportunity due to Chinese disapproval.  Experts say China’s retaliatory measures may be just the beginning of a much larger trade war as tensions continue to mount.

 Big Movers

Maxar Technologies (down 14.3%) – Share prices were down this week due to a short attack launched as a result of “brazen intangible asset accounting,” despite a big quarterly earnings beat in the second quarter.

 Vectrus (up 15.2%) – Share prices were up this week after revenue increased 24% year-over-year, with 12% growth coming from the Vectrus base business and the remainder coming from the SENTEL acquisition.

Transactions

American Systems Corporation has acquired DDL OMNI Engineering, LLC., a provider of alteration design and installation services; environmental services; materials and structures engineering; program and strategic management; sensor and electronics development; software, web and systems development; Technical Documentation; and Training and Simulation to the Federal Government and commercial customers.  The terms of the deal were not disclosed.

 Avenu Insights & Analytics, a portfolio company of Mill Point Capital, has agreed to acquire the assets and operations of the Local and Municipal Constituent Government Software Solutions business of Conduent Incorporated, a provider of solutions used by jurisdictions to manage service delivery across multiple agencies.  The terms of the deal were not disclosed.

Element Materials Technology Group, a portfolio company of Bridgeport Capital Ltd., has acquired Orbit Industries, Inc., a provider of specialization in ultrasonic, liquid penetrant, magnetic particle and chemical processing for raw materials, semi-finished and finished products, including landing gear components, airfoils and, aluminum wheels.  The terms of the deal were not disclosed.

 Shipbuilder Fincantieri S.p.A. and MERMEC, a portfolio company of the Angel group of Vito Pertosa, has agreed to acquire Vitrociset S.p.A, a provider of training and support in the information and communications technology (ICT) field in the defense and security market, as well as in logistics, transport and space sectors.  The terms of the deal were not disclosed.

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