Industry Week in Review – June 28, 2019

KippsDeSanto & Co. Industry Week in Review – June 28, 2019

Industry Week in Review – June 28, 2019

Aerospace & Defense Update

In a lopsided 86 – 8 vote, the Senate passed a $750 billion defense authorization bill.  The $750 billion figure is approximately $17 billion larger than the $733 billion figure the House of Representative has targeted for FY2020.  The Senate’s bill includes a 3.1% pay raise for troops, an additional 6,200 service members, an allocation of $300 million in funding for military housing, and full funding of Pentagon nuclear modernization programs.  The bill passed with ease despite concerns regarding U.S.’ nuclear capabilities and the overall size of the budget.  Proponents tout the bill as continuing efforts to expand and modernize the military to counter growing geopolitical threats.  The House of Representatives plan to vote on its version of the bill next month and inter-chamber negotiations are expected to follow thereafter.

Due to the unearthing of additional software problems in Boeing’s 737 MAX airplane, the Company anticipates the aircraft’s grounding to extend through September.  This delay further disrupts flight schedules for many airlines, as it was previously expected the aircraft would be cleared for service by the end of August.  Airlines including Southwest, American, and United have removed the MAX from their schedules through September and have not committed to a timeline beyond that.  Boeing’s shares closed down 3% in the wake of the news.  The FAA has insisted that there is no specific timeline on returning the MAX to service, and that clearance will not be granted until their all maintenance checks and safety concerns have been fully investigated and resolved.

Big Mover(s)

Raytheon Co. (Down 5.1%) – Shares prices were down this week due to criticism from United Technologies Corp. (“UTC”) shareholders over the rationale behind the merger of UTC and Raytheon.

Triumph Group (Up 21.4%) – Share prices were up this week in response to Triumph’s announcement that it will begin supporting Mitsubishi’s SpaceJet M100 program.

Transactions

Accenture plc (NYSE:ACN) has agreed to acquire BCT Solutions, a technology consultancy that specializes in Command and Control, Cybersecurity, Cyber Defense services and expertise, supporting the delivery of Defense, National Security, and Public Safety mission-support capabilities. Terms of the transaction were not disclosed.

AerSale, Inc. has acquired Qwest Air Parts, Inc., a provider of aircraft dismantlement and the refurbishment and resale of used serviceable materials. Terms of the transaction were not disclosed.

Bromford Industries Limited, a portfolio company of Liberty Hall Capital Partners, acquired Accrofab Limited, a provider of complex fabricated and machined engine bracketry for the global aerospace industry. Terms of the transaction were not disclosed.

METIS Solutions, LLC, a portfolio company of Blue Delta Capital Partners, has acquired Pluribus International Corp., a provider of counterintelligence, critical infrastructure protection, all-source analysis, and other mission-focused support services to the IC, Department of Defense, and other national security clients.  Terms of the transaction were not disclosed.

Mitsubishi Heavy Industries Ltd. has agreed to acquire the CRJ regional jetliner program of Bombardier, Inc., which provides maintenance, support, refurbishment, marketing, and sales activities for the CRJ Series aircraft. The deal is worth an estimated $570 million.

Novaria Group, a portfolio company of Rosewood Private Investments and Tailwind Advisors, has acquired Acra Aerospace, LLC, a provider of the design, development, and manufacture of complex engine components. Terms of the transaction were not disclosed.

Saudi Arabian Military Industries, a subsidiary of the Saudi Arabian sovereign wealth fund, has agreed to acquire Advanced Electronic Company, a provider of the design, development, manufacture, maintenance, and repair of several advanced industry and military electronic systems, devices, and equipment. Terms of the transaction were not disclosed.  

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Industry Week in Review – June 14, 2019

KippsDeSanto & Co. Industry Week in Review – June 14, 2019

Industry Week in Review – June 14, 2019

Aerospace & Defense Update

This past week, United Technologies Corporation (“UTC”) doubled down on the aerospace market with an all-stock deal to merge with defense contractor Raytheon Company (“Raytheon”).  The combined company, valued at more than $100 billion, would be the world’s second-largest aerospace and defense company by sales behind Boeing, with annual revenue of approximately $74 billion.  The combined entity plans to produce a wide array of products ranging from engines and seats for the F-35, to Patriot missile launchers and space suits.  The proposed deal intensifies the consolidation in the aerospace and defense industry as plane makers seek better terms from suppliers and the U.S. government puts greater pressure on contractors to cut costs and invest in new technologies, such as space systems and cybersecurity.  The new company will be named Raytheon Technologies Corp.  UTC shareholders will own 57% of the shares and UTC plans to appoint eight of the 15 new directors.  Raytheon shareholders will own the remaining 43% of the combined company, and Tom Kennedy, Raytheon Chairman and CEO, will be appointed Executive Chairman.

Members of the House Armed Services Committee passed a $733 billion defense policy bill with a final vote of 33-24.  This concluded a series of debates throughout the week, as HASC Committee Chairman Adam Smith was ultimately able to push through his plan despite some opposition.  Republicans have been calling for a $750 billion budget, arguing that this number would keep in line with the 3 to 5 percent growth needed to keep pace with Russia and China.  Specifically, the U.S. is concerned about the continued development of next-generation weaponry.  Democrats have argued that this bill represents strong yearly growth.  Among things that were included were a 3.1 percent pay raise for troops and funding for the new Space Corps in the Air Force.  Within the Senate, Republicans have already set their authorization bill draft at $750 billion.  The bill will now move on to the full House, which will vote next week, while the House and Senate are expected to work on a compromise draft throughout the summer.

Government Technology Solutions

Over the past five years, cybersecurity has materialized as one of the U.S. Government’s most pressing concerns.  Outside of traditional defensive measures, thanks in part to the National Defense Authorization Act of 2019, an empowered Cyber Command has driven American interests to focus on expanding into more aggressive defensive as well as offensive measures to protect IP and deter adversarial provocations.  In addition to securing national data, increased funding and focus on cyber priorities has trickled to other areas of technological modernization and has been an instrumental driver in the switch from legacy systems to the cloud.  This continues to be a large focus area government-wide and in particular within the intelligence community (“IC”).  According to principal deputy director of national intelligence, Sue Gordon, “the advances we’ve made in security are probably what have allowed the greatest movement in mission.”  While there has been a large ideological shift regarding the importance of cybersecurity and conversion to the cloud, the majority of the $90 billion in annual government IT spend goes toward older data centers that are especially vulnerable to hackers.  Thus, increased spending on cloud initiatives is likely to continue in the foreseeable future across all government agencies.

Big Mover(s)

Raytheon Company (Down 4.6%) Shares decreased after analysts lowered stock ratings and cut price targets in response to the company’s announced merger with United Technologies Corporation.

Spirit AeroSystems Holdings, Inc. (Down 6.8%) Shares decreased after analysts turned bearish on the commercial aerospace original equipment manufacturer (“OEM”) sector due to ongoing uncertainties related to the grounding of Boeing Co.’s 737 Max jets and associated aerospace supply chain risks.

Transactions

AeroVironment, Inc. has acquired Pulse Aerospace, LLC, a provider of small VTOL UAS technology.  The deal is worth an estimated $25.7 million.

DLH Holdings Corp. has acquired Social & Scientific Systems, Inc., a provider of health solutions in clinical and biomedical research, epidemiology, health policy, and program evaluation.  The deal is worth an estimated $70 million.  KippsDeSanto & Co. acted as the buyside advisor to DLH.

EMCORE Corp. has acquired Systron Donner Inertial Systems, Inc., a provider of quartz microelectromechanical systems (“QMEMS”) used in inertial sensing products that provide precision guidance, navigation and locational systems.  The deal is worth an estimated $25.8 million.

Hanwha Aerospace Co., Ltd., has agreed to acquire Edac Technologies Corp., a provider of precision components for aircraft engines and airframes.  The deal is worth an estimated $297.2 million.

Héroux-Devtek, Inc. has acquired Alta Precision, Inc., a provider of high-precision landing gear components.  The deal is worth an estimated $17.3 million.

IIA Technologies Corp. has acquired KeyLogic Systems, Inc., a provider of R&D technology management, business intelligence (“BI”) data analysis and visualization, software and system engineering, cloud implementation, and biometrics solutions.  Terms of the transaction were not disclosed.

United Technologies Corp. has agreed to merge with Raytheon Company, a provider of premier systems with advanced technologies to address rapidly growing segments within aerospace and defense.  The deal is worth an estimated $93 billion.

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Industry Week in Review – June 07, 2019

KippsDeSanto & Co. Industry Week in Review – June 07, 2019

Industry Week in Review – June 7, 2019

Aerospace & Defense Update

This week, Amazon Web Services (“AWS”) announced its first two ground-based stations were operational. These stations, which will be used by both commercial and government customers, provide next-generation communication capabilities that will enable satellite operators to access data in near-real time.  These stations are equipped with enhanced data processing capabilities, encrypted communications for sensitive data, and the ability to access satellites worldwide.  These features enable operators to control a given satellite through the ground station, load data from the satellite into the station, and process that data through a cloud computing and storage interface. The stations, which were designed with government users in mind, have built in protections for sensitive data. These protections will allow government agencies to transmit encrypted data through the network and into the AWS Ground Station terminals. Amazon expects these systems to be vital in disaster relief scenarios, where up-to-date images and information are essential to providing immediate and efficient aid.  Over the next six months, Amazon anticipates launching ten more operational stations.

The grounding of more than 370 Boeing 737 MAX aircraft has significantly increased demand for aircraft rental services.  Full-service aircraft rental providers such as EuroAtlantic Airways and Avion Express have witnessed increased activity as airlines attempt to patch their disrupted flight schedules caused by the 737 Max’s suspension.  These companies, which provide all essential components of flying a plane including pilot, staff, fuel, and insurance coverage, generally charge by the hour, with the cost of a single-aisle plane ranging up to several thousand dollars per hour.  However, since the 737 Max’s grounding, monthly lease rates have increased more than 30% for short-term narrow-body aircraft rentals.  Despite Boeing’s announcement that the Company has fixed the flight-control system ostensibly responsible for the two 737 MAX fetal crashes, the Federal Aviation Administration and international regulating authorities have yet to signal when they will clear the 737 MAX for flight.

Big Mover(s)

General Dynamics Corporation (Up 8.2%) – Share prices increased as it was announced that General Dynamic’s business unit, Land Systems, secured a $25.6 million contract to produce the MK 46 MOD 2 Gun Weapon System (“GWS”) for Littoral Combat Ship (“LCS”) and Landing Platform Dock (“LPD”). This comes after General Dynamic’s shares were down 10% in May.

SAIC (Up 12.1%) – Share prices rose as SAIC announced revenues increased 37% 1Q19, fueled through several notable contract awards such as the $292M follow-on Safety and Mission Assurance Engineering Contract with NASA and a $535M contract to provide information technology support for the Defense Threat Reduction Agency (“DTRA”).

Transactions

Wynnchurch Capital, Ltd. has agreed to acquire two Industrial Forging Business Units from Allegheny Technologies, Inc., a provider of carbon steel forged products used in aerospace and industrial end-markets.  The deal is worth an estimated $37.0 million.

BAE Systems, Inc. acquired Riptide Autonomous Solutions, LLC, a provider of innovative, affordable unmanned underwater vehicle (“UUV”) technology and solutions.  Terms of the transaction were not disclosed.

 Consolidated Precision Products Corp. has agreed to acquire the Cast Products business of Allegheny Technologies, Inc., a provider of titanium investment castings that are primarily used by aerospace & defense OEMs in the production of commercial jet airframes and engines.  Terms of the transaction were not disclosed.

Angeles Equity Partners, LLC acquired APCT, Inc. a provider of reliable, quick-turn printed circuit board (“PCB”) prototypes with global production management capabilities.  Terms of the transaction were not disclosed.

Patria Oyj acquired Belgium Engine Center SPRL, a provider of military jet engine maintenance, repair, and overhaul mainly servicing the Pratt & Whitney F100 engine which powers F-15 and F-16 aircraft. Terms of the transaction were not disclosed.

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Industry Week in Review – May 31, 2019

KippsDeSanto & Co. Industry Week in Review – May 31, 2019

Industry Week in Review – May 31, 2019

Aerospace & Defense Update

Honeywell is using blockchain to revolutionize the market for used aircraft components, facilitating the ability to check the certification and origin of a part and speed up transactions.  Blockchain is a decentralized system that makes it possible to create and share a digital ledger of transactions.  Earlier this year, Honeywell’s Aerospace unit introduced an online marketplace based on blockchain that lets more than 800 international buyers and sellers trade aerospace parts in real time.  The marketplace, called GoDirect Trade, has notched more than $2 million in sales thus far, and Honeywell Aerospace targets sales of $10 million by year-end.  Participants include Dassault Falcon Jet Corp. and aircraft-repair specialist StandardAero Aviation.  Before blockchain, a transaction took, on average, two phone calls and four emails to arrange and another two days to close.  With blockchain, a buyer can locate a part and purchase it immediately.  So far, the average transaction has been about $8,000.

The U.S. Army is freeing up $10 billion to apply to its top priorities in its next five-year budget plan.   As part of a review of programs and spending, the U.S. Army set out to find $10 billion within the budget that could be reallocated toward priorities in 2021 – 2025.  The money shook out through another round of what the U.S. Army informally calls the “night court,” a review process that had freed up $30 billion in the last budget cycle to get modernization programs off the ground.  The U.S. Army is also working to shift spending so that 50 percent is applied to new programs and 50 percent to legacy systems in 2024 – 2025.  The U.S. army had been applying 80 percent to legacy programs and just 20 percent to new capabilities as recently as two years ago.

Big Mover(s) 

The Boeing Company (Down 3.7%) – Share prices continued to fall this week as Boeing recovers from the controversy surrounding the two fatal crashes of its 737 MAX jets.  As Boeing works to get its jets back in the air, it will have to overcome scrutiny from regulators that could extend the grounding of the aircraft.

Transactions

Applied Energetics, Inc. has agreed to acquire Applied Optical Sciences, Inc., a provider of technologies and IP related to the application of optical physics in a broad range of areas, including photonics and advanced Ultra-short Pulse (“USP”) laser development.  Terms of the transaction were not disclosed.

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Industry Week in Review – May 24, 2019

KippsDeSanto & Co. Industry Week in Review – May 24, 2019

Industry Week in Review – May 24, 2019

Aerospace & Defense Update

This week, President Trump announced his intention to nominate Barbara Barrett to be the next Secretary of the Air Force.  In 2003, she was nominated for this same position, but withdrew her name before the confirmation process.  She was later nominated and confirmed as the U.S. Ambassador to Finland.  In addition to her experience as President George W. Bush’s Ambassador, Barrett brings a blend of both public and private sector experience to the position.  Previously, she served as the chairwoman of The Aerospace Corporation, a federally funded nonprofit corporation that provides technical guidance and advice on a wide array of military, civil, and commercial space missions.  President Trump believes that Barrett’s leaderships qualities, relevant experiences, and vast industry knowledge make her an ideal candidate to lead the Air Force and maintain U.S. air and space dominance.

An independent report released from the Congressional Budget Office (“CBO”) estimated President Trump’s proposed Space Force could cost as much as $4.7 billion in initial costs to launch the program.  This estimate is more than double the Trump administration’s previous estimate of $2 billion to establish the Space Force over the next five years.  The primary assumption driving this disparity is the Trump administration’s optimism around the Space Force’s ability to leverage existing Air Force infrastructure to remain efficient and suppress costs.  However, the CBO questions the viability of this strategy.  The Trump administration’s GFY2020 budget requests included $72 million to begin launching the Space Force.

Government Technology Solutions

This past week, the North American division of Serco Group plc, Serco, Inc., announced its intentions to acquire the Naval Systems Business Unit (“NSBU”) of Alion Science and Technology Corp. (“Alion”), including its Canadian business and several related contract operations, for $225 million.  Alion’s NSBU provides systems engineering for the Navy and will allow Serco, a U.K. based company, to secure a larger foothold in the growing U.S. defense market and hedge against potential headwinds from BREXIT and Teresa May’s impending June 7th resignation. Additionally, this divestiture allows Alion to continue to shape its offerings more towards electronic warfare and intelligence, surveillance, and reconnaissance (“ISR”).  Serco, Inc.’s announcement represents its 2nd U.S.-based transaction since buying SI International, Inc. in 2008, as it purchased BTP Systems, LLC in 2017.  Having completed two acquisitions over the past two years, Serco, Inc. is demonstrating its desire to use M&A as a tool to add scale and expand offerings while taking advantage of favorable budgetary conditions in the U.S.

Big Mover(s)

Babcock International (Down 11.3%) – Share prices were down this week amid a slowdown in government orders ahead of Brexit and two of its largest contracts coming to an end.

Transactions

Park-Ohio Holdings Corporation has agreed to acquire Erie Press Systems, a provider of forging presses, hydraulic and mechanical presses, and metal stretch-forming and carbon extrusion machines for aerospace and defense markets.  Terms of the transaction were not disclosed.

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Industry Week in Review – May 17, 2019

KippsDeSanto & Co. Industry Week in Review – May 17, 2019

Industry Week in Review – May 17, 2019

Aerospace & Defense Update

This past week, the U.S. State Department cleared more than a billion dollars in potential weapon sales for three of America’s military allies.  The amount tops more than $1.01 billion in potential sales.  Raytheon is the primary contractor on all three of the potential sales.  Canada has been cleared to purchase $387 million worth of MK 54 lightweight torpedo conversion kits, South Korea $314 million in SM-2 Block IIIB missiles, and Japan $313 million worth of AIM-120C-7 Advanced Medium-Range Air-to-Air Missiles.  Primary work will be done at Raytheon’s Tucson, Arizona and Portsmouth, Rhode Island facilities.  The U.S. State Department has noted that these sales will support the foreign policy and national security objectives of the United States by meeting the legitimate security and defense needs of its closest allies.

Private equity investor, Onex, is close to gaining control of Canadian airline, WestJet, after the carrier’s board recommended accepting a takeover offer.  In addition, Air Canada has recently announced plans to take over Transat, the parent company of leisure carrier Air Transat.  The acquisition presents a unique opportunity in the leisure travel market.  Air Canada is not only buying the airline but also Transat’s other branches in the tourism sector. It had been rumored that Onex and WestJet also had been looking at acquiring Transat, which would have created a more formidable competitor for Air Canada.  Onex’s purchase of WestJet is the biggest private equity deal ever in the airline industry and the 16th biggest overall airline acquisition. It comes amid open speculation that investor Warren Buffett could also be in the market to buy an airline, notably Southwest Airlines.

Big Mover(s)

Embraer (Down 9.6%) – Share prices were down this week following release of the aircraft manufacturer’s latest quarterly report that included weak deliveries of just 11 commercial jets and 11 executive aircraft.

Kratos Defense & Security Solutions (Up 4.9%) – Share prices were up this week following news of quarterly earnings of $0.08 per share, beating the estimates of $0.02 per share. This compares to earnings of $0.05 per share a year ago.

Transactions

Acorn Growth Companies has acquired DIMO Corp, a provider of value-added distribution of operationally critical parts and higher-level assemblies for power, electromechanical, life support and mission-specific aircraft systems.  Terms of the transaction were not disclosed.

Aeromax Industries has acquired Dar-Ken, a provider of elastomer products for helicopters, whose product line includes custom seals, sleeves, ducts, and gaskets.  Terms of the transaction were not disclosed.

BlackBern Partners, LLC has acquired Zentech Manufacturing, Inc., a provider of highly complex electronic and RF circuit cards and assemblies.  Terms of the transaction were not disclosed.

By Light Professional IT Services, Inc. has acquired Metova Federal, LLC, a provider of cyber range and cyber training services to customers across the DoD, Federal Civilian, State and Local, and Commercial markets.  Terms of the transaction were not disclosed.

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Industry Week in Review – May 10, 2019

KippsDeSanto & Co. Industry Week in Review – May 10, 2019

 Aerospace & Defense Update

This week, President Trump nominated acting Secretary of Defense, Patrick Shanahan, as the next Secretary of Defense.  Before he was selected by Trump to serve as James Mattis’ deputy Secretary of Defense, he worked in the private sector at Boeing for more than 30 years in a variety of roles.  As deputy Secretary of Defense, the second-highest civilian position, Shanahan was responsible for day-to-day operations and implementing military initiatives, such as executing President Trump’s plan of increasing the size of the U.S. military.  Shanahan became Acting Secretary of Defense after Mattis resigned, thereby assuming all major roles and responsibilities of the position.  If confirmed by the Senate,  Shanahan intends to aggressively implement the National Defense Strategy and remain committed to air, land, and sea military modernization efforts.

Following Iran’s announcement that the country may restart parts of its nuclear program, The United States imposed significant sanctions against Iran’s industrial-metals sector, targeting the country’s iron, steel, aluminum, and copper industries, which directly affect more than $5 billion of Iran’s non-oil exports.   Iran recently stated it would relinquish limits on stockpiling nuclear materials if European countries supported its struggling economy as tensions with the U.S. continue to rise.  However, if key European countries such as France, the United Kingdom, and Germany refuse to help Iran circumvent U.S. sanction, Iran threatened to escalate its nuclear programs, including re-opening its plutonium reactor complex and increasing production of enriched uranium.  These countries have not signaled their respective decisions yet, but Iran’s threats create a difficult decision as these countries now need to choose between maintaining their critical alliance with U.S. and upholding their historic nuclear pact with Iran.

Big Mover(s)

 Booz Allen Hamilton Co. (Up 2.2%) – Share prices were up this week as Booz Allen Hamilton announced several large investors, including Oppenheimer & Co., Mercer Global Advisors, Inc., and Boston Advisors LLC, all grew their positions in shares of the Company in the 1Q19.

 Vectrus, Inc. (Down 9.6%) – Share prices were down this week following the Company announcement that despite increasing earnings 15% year-over-year, the Company still missed earnings estimates by $0.13, or 17.3%.

 Transactions

AirBoss of America Corporation has agreed to acquire Critical Solutions International, Inc., a provider of testing, development, and production of various mine-detection vehicles and systems to the United States Army. Terms of the deal were not disclosed.

CLM Equity Partners acquired Zircon Precision Products, Inc., a provider of precision aerospace machining business supporting both commercial and military applications. Terms of the deal were not disclosed.

Envistacom, LLC has acquired, Fast Fit Technologies, LLC, a provider of open-source communication waveform and data analytics virtualization.  Terms of the deal were not disclosed.

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Industry Week in Review – May 03, 2019

KippsDeSanto & Co. Industry Week in Review – May 03, 2019

Industry Week in Review – May 3, 2019

Aerospace & Defense Update

Alphabet Inc.’s Wing Aviation received the first U.S. authorization to operate a fleet of unmanned aircraft for consumer-goods deliveries, a move that could kick-start many companies’ commercial unmanned aircraft services.  Industry officials in the past operated under the assumption that it would take until 2021 for the Federal Aviation Authority (“FAA”) to implement wide-ranging unmanned aircraft rules establishing a framework for deliveries.  However, with its recent approval to Wing Aviation, the FAA is signaling its willingness to approve so-called air-carrier certifications.  This past week’s move highlights efforts by the U.S. unmanned aircraft industry to catch up to international counterparts as countries, such as Singapore and Australia, are moving faster than the FAA in authorizing routine commercial unmanned aircraft flights and setting up new air-traffic control systems to facilitate growth.

In a major step towards strengthening naval capabilities, South Korea plans to build three new destroyer-class ships equipped with American-made Aegis combat systems and sophisticated ballistic missile interceptors.  The country endorsed the $3.3 billion effort to acquire the additional destroyers by 2028, which plans to help the South Korean Navy respond to potential maritime disputes more effectively as well as carry out peacekeeping missions.  South Korea has also approved a plan to develop three new heavy-attack submarines by 2028.  Under this plan, three 3,450-ton submarines are to be constructed for $2.9 billion in which the systems development contract for the subs is to be awarded to Daewoo Shipbuilding and Marine Engineering.

Big Mover(s)

Maxar Technologies (Up 32.8%) – Share prices were up this week following news that the WorldView-4 satellite’s insurance payout of $183 million will be paid in full by insurers and will offset the $155 million loss in book value due to failed gyros that prevented the satellite from operating properly.

L3 Technologies (Up 6.8%) – Share prices were up this week following news that the it smashed analysts’ earnings per share and revenue expectations with first-quarter results.

Transactions

AE Industrial Partners has acquired Alpine Air Express, a provider of regional air cargo services primarily throughout the Mountain Region of the Western United States.  Terms of the transaction were not disclosed.

ComTech Telecommunications Corp. has acquired the state and local government Next Generation 911 business from General Dynamics Information Technology, Inc., a provider of standards-based, all-IP emergency communications infrastructure enabling voice and multimedia communications between a 9-1-1 caller and a 911 center.  Terms of the transaction were not disclosed.

II-VI Inc. has acquired Redstone Aerospace Corp., a provider of opto-mechanical subsystems, specializing in the design and fabrication of cryogenic systems, beam directors, and high-precision pointing gimballed mechanisms to both NASA and the Department of Defense.  The transaction is worth an estimated $30 million.

Parker Hannifin Corp. has agreed to acquire LORD Corp., a provider of advanced adhesives, coatings, and specialty materials as well as vibration and motion control technologies.  The transaction is worth an estimated $3.7 billion.

Tex Tech Industries, Inc., a portfolio company of Arlington Capital Partners, has acquired the Coating Business and U.S. Defense-Related Operations of Highland Industries, Inc., a provider of coated and laminated products for the aerospace & defense end markets.  Terms of the transaction were not disclosed.

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Industry Week in Review – April 26, 2019

KippsDeSanto & Co. Industry Week in Review – April 26, 2019

Industry Week in Review – April 26, 2019

Aerospace & Defense Update

Numerous aerospace and defense companies announced 1Q19 earnings this week. Lockheed Martin reported strong revenue and earnings. First quarter revenue for the aerospace giant was $14.3 billion, a 23% year-over-year (“YoY”) increase from 1Q18 and earnings were $1.7 billion for the quarter, increasing 47% from the same period in 2018. Strong performance from Lockheed’s missile and fire control systems division drove a significant amount of the growth. Following the announcement, Lockheed raised its 2019 sales projections to $57.5 billion. Additionally, General Dynamics surpassed earnings per share estimates by $0.12 (5.0%) and increased YoY revenue by 23%, driven by sales growth in all five of its key segments. However, The Company’s Information Technology, Combat Systems, and Aerospace divisions performed exceptionally well, increasing YoY revenue by 91%, 14%, and 23%, respectively.

The Federal Aviation Administration (“FAA”) approved Google’s sister company, Wing Aviation, to operate a fleet of unmanned aircraft to transport commercial goods. This clearance enables Wing Aviation to operate as a traditional cargo carrier and features several safeguards including pilot training programs, approved safety systems, and mandatory data collection systems. While the FAA’s decision only grants Wing Aviation access to operate its fleet in Blacksburg, Virginia, the adoption of unmanned vehicles is several years ahead of schedule as most industry experts did not anticipate the FAA approving commercial utilization of unmanned aircraft until 2021. Several other commercial companies, including Amazon, are pursuing similar approvals to deliver their products through unmanned aircraft.

Government Technology Solutions

Jacobs Engineering Group has announced that it will acquire KeyW Holding Corp. for $815 million – a 43% premium to KeyW’s closing price on April 18. KeyW CEO Bill Weber said, “This transaction will propel KeyW’s capabilities further and create new opportunities for research and development our customers need to enhance their national security and intelligence capabilities.” KeyW will significantly bolster Jacobs’ Intelligence, Surveillance and Reconnaissance (“ISR”) capabilities, giving it a larger footprint in the high-growth sector. The companies are aiming to close the merger by August 31.

Arlington Capital is rebranding its Integrity Applications Inc. platform, which has combined with Xebec Global and Dependable Global Solutions. The combined entity, which will be known as Centauri, will focus on cyber, space, defense and intelligence solutions for the national security market. Centauri CEO, Dave Dzaran said, “With IAI’s expertise in complex engineering, Xebec’s deep understanding of security threats and IAI and DGS’ strong cybersecurity talent, there is no doubt in my mind that we will be able to more fully address the scope of our customer needs as one company: Centauri.” Dzaran says the company will invest heavily in cutting-edge capabilities to provide superior solutions to the national security community.

Big Movers

KeyW (Up 43.8%) – Share prices were up this week following an announcement that Dallas-based Jacobs Engineering Group will acquire the Company for $815 million.

Bombardier (Down 15.0%) – Share prices were down this week following the Company cutting its 2019 revenue projection to $17 billion from $18 billion due to “…the timing of aircraft deliveries, foreign exchange headwinds and a slower production ramp-up at transportation,” according to CEO Alain Bellemare.

Transactions

Jacobs Engineering Group, Inc. has agreed to acquire the KeyW Holding Corporation, a provider of national security solutions to the intelligence, cyber, and counterterrorism communities in the U.S, in a definite merger agreement that joins KeyW with Atom Acquisition Sub, Inc., a newly created, wholly owned indirect subsidiary of Jacobs. The deal is worth an estimated $815 million.

Enlightenment Capital has acquired Trowbridge & Trowbridge, LLC, a provider of cloud engineering, cybersecurity, IT engineering, application development, and network engineering solutions to the federal government. Terms of the deal were not disclosed.

Chart National, L.P. has made an equity investment in Sequoia Holdings, Inc., a provider of products and services in the fields of optronic, telecommunications, information technology, and cybersecurity in the defense and civil sector. Terms of the deal were not disclosed.

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Industry Week in Review – April 12, 2019

KippsDeSanto & Co. Industry Week in Review – April 12, 2019

Aerospace & Defense Update

FLIR Systems, Inc. acquired DroneBase, Inc., which offers a global enterprise pilot network of unmanned vehicles. DroneBase has a strong presence across numerous industries and operates in more than 70 countries, providing significant market access to FLIR Systems. This transaction follows-up FLIR’s acquisition of Endeavor Robotics announced earlier this year and marks the company’s fourth unmanned systems related deal in the last 3 years, positioning FLIR as a leading unmanned solutions provider.

This week, Lockheed Martin began final qualification testing on a ground control system to support the Air Force’s second Global Positioning Systems (“GPS”) 3 Satellite. This next-generation satellite, which is scheduled to be launched this summer, is expected to enhance navigation and timing information accuracy by 300% and improve signal jamming capabilities 8-fold. However, in order for this GPS to become operational, it requires a new ground control system that can link up to the satellite. Raytheon is developing this system, known as the Operational Control Segment, but it will not be active until 2021. Consequently, the Air Force contracted Lockheed Martin to upgrade the current system to bridge the gap until the Operational Control Segment becomes available. Lockheed Martin anticipates delivering the system in May, allowing the GPS 3 Satellite to be launched 18 months ahead of schedule.

Government Technology Solutions Update

Continuing the drawn-out procurement of the Pentagon’s $10 billion Joint Enterprise Defense Infrastructure (“JEDI”) contract, the Department of Defense (“DoD”) announced that “there is no adverse impact on the integrity of the acquisition process.” What had initially spurred from Oracle’s protest of the Pentagon’s single award strategy led to an extended delay as the DoD investigated whether Amazon had used undue influence to shape the award in its favor. With the DoD’s resolution, JEDI’s procurement will proceed with Amazon and Microsoft as the sole competitors, removing Oracle and IBM from the competition. JEDI has continued to dominate headlines over the last year, with the prevailing awardee tasked to become the lone cloud provider for warfighters domestically as well as around the globe. There are only a limited number of companies that have the capabilities, infrastructure, and required expertise to meet this mission’s requirements, especially with the onus of data security being a top priority. As the Pentagon continues with the award evaluation, DoD spokeswoman, Elissa Smith, revealed “the earliest the contract is likely to be awarded is mid-July.”

Big Mover(s)

Northrop Grumman (Up 2.4%) – Share prices were up this week following the U.S. Navy’s announcement that they selected Northrop Grumman to produce 24 E-2D Advanced Hawkeye aircraft. The contract is valued at $3.2 billion.

Transactions

EverWatch Corporation, a portfolio company of Enlightenment Capital, has acquired Northwood Global Solutions, LLC, a provider of cybersecurity, cloud, big data, and analytics solutions as well as IT services to the intelligence community and other Federal agencies. Terms of the deal were not disclosed.

FLIR Systems, Inc. has acquired DroneBase, Inc., a provider of global drone operations for unmanned aerial surveillance pilot networks. Terms of the deal were not disclosed.

 

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