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Industry Week in Review – May 10, 2019

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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

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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

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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

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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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Industry Week in Review – April 5, 2019

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KippsDeSanto & Co. Industry Week in Review – April 5, 2019

Aerospace & Defense Update

The U.S. Army has issued a request for information (“RFI”) for a future long-range assault aircraft to replace UH-60 Black Hawk helicopters by fiscal 2030. While most of the cost requirements were not made public in the RFI, the Army does note that it wants to purchase an aircraft that will be roughly $43 million per unit. Bell and a Sikorsky-Boeing team have each built a technology demonstrator aircraft to help the Army lay out its requirements for the future aircraft. Bell’s V-280 Valor tiltrotor has been flying since December, and the Sikorsky-Boeing SB-1 Defiant flew for the first time this past month. The Army plans to present an acquisition strategy that will focus on a non-developmental approach to procuring a new long-range assault aircraft that should lead to a competitive down select by fiscal 2022 at the earliest.

Japan and South Korea both reached milestones with their Lockheed Martin F-35 Lightning II Joint Strike Fighters. The Japan Air Self-Defense Force declared initial operating capability for its first F-35 squadron this past week when the 302 Hikotai at Misawa Air Base held a ceremony to celebrate this operating capability for the F-35As. Meanwhile, neighboring South Korea welcomed the first two F-35As that same day, when the aircraft were ferried across the Pacific to an air base in Cheongju, near Seoul. South Korea has 40 F-35As on order from a 2014 contract worth about $7 billion, all of which are planned to be delivered by 2021. The first unit to operate the South Korean F-35s will be the Republic of Korea Air Force’s Cheongju-based 17th Fighter Wing.

Government Technology Solutions Update

With the launch of a federal arm, Comcast becomes the latest in a wave of larger commercial players seeking to gain a foothold in the federal market. Comcast believes the new division will provide premier telecommunications services and solutions for U.S. Government and Public Sector organizations. The move falls in line with the Company’s efforts since 2006 to “steadily move up market from (small and medium-size business) customers to mid-market to large enterprise,” according to Comcast President Bill Stemper. The deal follows Comcast’s acquisition of BluVector last month, which will bolster the global media giant’s cybersecurity, artificial intelligence and machine learning capabilities. The rise of cloud computing and systems modernization in the government is the catalyst that continues to attract these commercial investments within the federal space. Amid the introduction of large commercial enterprises like Amazon and Microsoft, government contractors continue to adapt to the increased competition by adopting novel ways of doing business.

Big Mover(s)

Maxar Technologies (Up 15.2%) – Share prices were up this week following news of Maxar partnering with Vulcan Inc. to Support Domain Awareness Systems Using EarthWatch, which plans to support projects such as bringing reliable power and connectivity to underserved areas.

Triumph Group (up 25.9%) – Share prices were up this week following news that the defense contractor won a contract from aerospace giant Boeing to supply hydraulic system components for the U.S. Navy’s MQ-25 unmanned aerial refueling program

Transactions

A subsidiary of Elbit Systems Ltd. has agreed to acquire the Night Vision Business of Harris Corp., a provider of the development, production and supply of night vision technology for the U.S. and allied military and security forces and federal homeland security market. The transaction is worth an estimated $350 million.

Aernnova Aerospace S.A. has acquired Structural Integrity Engineering, a provider of aircraft and aircraft component certification, structural design, structural analysis and materials testing. Terms of the transaction were not disclosed.

Arlington Capital Partners has made an investment in Octo Consulting Group Inc., a provider of agile software development, UI / UX, cloud, infrastructure, blockchain and infrastructure modernization solutions. Terms of the transaction were not disclosed.

BJG Electronics, Inc. has acquired Connector Tech, LLC, a provider of high-reliability electronic interconnect products serving a variety of harsh environment applications in the industrial, aerospace and military markets. Terms of the transaction were not disclosed.

Firan Technology Group Corp. has acquired an undisclosed U.S.-Based Circuit Board Company, a provider of manufacturing capacity for standard technology product for aerospace and defense applications. The transaction is worth an estimated $3 million.

Global Ordinance LLC has acquired Chemring Military Products Inc., a provider of US-standard and non-standard ammunition and weapons systems. KippsDeSanto acted as the exclusive financial advisor to eGlobalTech Inc. Terms of the transaction were not disclosed.

Tetra Tech, Inc. has acquired eGlobalTech Inc., a provider of IT solutions, cloud migration, cybersecurity, and management consulting services. KippsDeSanto acted as the exclusive financial advisor to eGlobalTech Inc. Terms of the transaction were not disclosed.

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Industry Week in Review – March 29, 2019

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KippsDeSanto & Co. Industry Week in Review – March 29, 2019

Aerospace & Defense Update

U.S. air safety regulators announced that the initial findings of the “black box” recordings from the Ethiopian Airlines crash earlier this month suggest the automated system on the Boeing 737 Max Jet, known as MCAS, malfunctioned during the event.  Five months earlier, a Lion Air flight in Indonesia also crashed due to a MCAS system misfire.  While both investigations are ongoing, Boeing has already outlined plans to completely overhaul the MCAS systems to make it less aggressive and more user friendly, to include fail safes for smoother operations.  Despite the overhaul efforts, Boeing’s 737 MAX is expected to remain grounded for several months as regulators continue their investigations.

The U.S. Army announced its updated air and missile defense (“AMD”) strategy that prioritizes drone and hypersonic missile counter measures.  A key element of the AMD strategy is to link together various defense systems, which would create a centralized Integrated AMD Battle Command that will ensure all systems are operating in sync on the battlefield.  The Army outlined four major areas that are critical to implementing the strategy – developing the correct material solutions, creating a military AMD structure that is operational over various domains, providing trained and ready AMD forces, and building the scale to maintain and improve the AMD capabilities over time.  The AMD strategy is a piece of the Army’s overarching initiative to have a modernized military force capable of executing multi-domain operations by 2028.

Government Technology Solutions Update

Within President Trump’s GFY2020 budget proposal released earlier this month, which includes $750 billion for defense spending, cybersecurity remains a key priority for defense and civilian agencies alike.  The Administration’s intentions in the request include protecting Department of Defense (“DoD”) networks, supporting military objectives, and “defending the Nation.”  In a recent meeting with the House Armed Services Committee, Patrick Shanahan, Secretary for the DoD, stressed that “modernization is the most important thing we can do to maintain deterrence [and] create military capability, but that’s also what enables us economically.”  Cyber opportunities account for approximately $10 billion in the budget request and given Shanahan’s recognition of the far-ranging impact of cyber investment, it is likely that that figure will grow.

Big Mover(s)

Boeing (Up 5.3%) – Share prices show signs of recovery following the drastic plunge caused by Boeing’s 737 MAX 8 aircraft crash in Ethiopia earlier this month. Shares remain ~13% down from their 52-week high in March.

Transactions

By Light Professional IT Services, LLC, a portfolio company of Sagewind Capital, has acquired Phacil, Inc., a provider of software development, cybersecurity, systems engineering, and managed services to federal clients.  Terms of the deal were not disclosed.

MAG Aerospace Corporation has agreed to acquire Encore Aviation, a provider of home base and deployed engineering and maintenance services to a wide variety of fixed and rotary wing aviation organizations. Terms of the deal were not disclosed.

Orolia S.A. has acquired Skydel Solutions, Inc., a provider of global navigation satellite systems, including secure communications signals that provide reliable positioning, navigation and timing vulnerability testing for infrastructure applications. Terms of the deal were not disclosed.

Rheinmetall AG has agreed to acquire IBD Deisenroth Engineering, a provider of passive protection systems, with a focus on the use of next-generation materials in association with a modular and synergistic structural approach. Terms of the deal were not disclosed.

ST Engineering has agreed to acquire Newtec Group NV, a provider of satellite communications equipment and technologies for broadcast, government and defense, cellular backhaul, and consumer and enterprise VSAT markets and applications. The deal is worth an estimated $281 million.

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Industry Week in Review – March 15, 2019

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KippsDeSanto & Co. Industry Week in Review – March 15, 2019

Industry Week in Review – March 15, 2019

Aerospace & Defense Update

This week, President Trump submitted his GFY2020 defense budget proposal to Congress. The total $750 billion proposal represents a ~5%, or $34 billion, increase from 2019 defense spending levels. Of the $750 billion requested, $164 billion will be placed in the overseas contingency operations (“OCO”) to circumvent budget caps. The budget proposal prioritizes investments in high-end capabilities and includes a $104 billion allocation for research, development, test, and evaluation (“RDT&E”). The Air Force, Army, and Navy are expected to receive $11.8 billion, $12.5 billion, and $9.95 billion respective increases in funding from GFY2019 levels. Over the next five years, the Pentagon anticipates top level defense budgets between $700 billion and $750 billion.

Following two fatal crashes of Boeing 737 MAX planes within the last five months, the Federal aviation Administration (“FAA”) temporarily grounded the aircraft, preventing airlines from using the model in U.S. airspace. Dozens of other countries, including the United Kingdom, Australian, and Canada have also grounded the aircraft. The decision came days after an Ethiopian Airlines jet crashed minutes into the flight. Boeing’s stock dropped 10.3% following the news of the crash and the subsequent grounding. Boeing maintains confidence in the MAX aircraft but recommended a temporary hiatus to ensure the plane’s safety.

Government Technology Solutions

This week, Canadian-based BlackBerry announced the launch of a Washington, D.C.-located subsidiary to support further expansion into the federal marketplace. This push into the federal landscape is partly in response to the increasing reliance by federal agencies on cloud computing and other NextGen IT capabilities. BlackBerry hopes that an expanded presence in D.C. will facilitate its adoption of necessary federal cloud certifications and compliance with U.S. national security requirements and augment its presence among federal agencies. Blackberry CEO, John Chen, said that he believes that the Company can “help the U.S. government securely build and connect all things from ATVs and drones to documents, emails, and the data that flows between them.” As a result, he wants the Company to invest in the federal market, where a “tidal wave of connected devices is in sight.” Also this week, FLIR Systems announced its plan to open a new headquarters near the nation’s capital. FLIR Systems aims to accelerate growth by increasing its presence in Washington, D.C. The new office will be home to CEO, Jim Cannon, and many other key company executives. Cannon said the move “…is critical to helping us grow our business, as it creates better proximity for FLIR to support key customers, investors, regulators and the more than 4,000 FLIR team members around the world.” These two announcements come on the heels of Parsons’ recent announcement to relocate its headquarters to the D.C. area and Amazon announcing a second headquarters in the area. These critical and strategic moves by IT heavyweights highlight the growing attraction to the nation’s capital as the federal government continues to increase funding for IT modernization initiatives.

Big Movers

Boeing (Down 10.3%) – Share prices were down this week following a fatal crash of Boeing’s 737 MAX 8 aircraft. The is the second fatal crash involving this model in the last 5 months, causing passengers and investors to question to jetliner’s safety.

Transactions

Comcast Corp. has acquired a portfolio company of LLR Partners, BluVector, a provider of cyber-threat detection solutions that protect federal and commercial companies against evolving security threats with the use of artificial intelligence and machine learning. Terms of the deal were not disclosed.

DFW Capital has bought a majority stake in Sev1Tech, a provider of high-end information technology services, primarily for the federal government. Terms of the deal were not disclosed.

Cubic Corporation has acquired Nuvotronics, Inc., a provider of microfabricated radio frequency products. The deal is worth an estimated $64 million.

Greenbriar Equity Group and First Aviation Services have agreed to acquire Dart Aerospace, a provider of mission equipment and aftermarket components for the helicopter and fixed-wing industries. Terms of the deal were not disclosed.

STS Aviation, a portfolio company of Greenbriar Equity, has acquired Triumph Group, Inc.’s Aviation Services – NAAS Division, a provider of maintenance support to airlines, MROs, government operators and OEMs, specializing in in fuel systems maintenance, leak detection and bladder cell repair. Terms of the deal were not disclosed.

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Industry Week in Review – March 8, 2019

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KippsDeSanto & Co. Industry Week in Review – March 01, 2019

Industry Week in Review – March 8, 2019

Aerospace & Defense Update

Raytheon recently won a contract from the Defense Advanced Research Projects Agency to work on its new hypersonic tactical boost glide weapon. According to Raytheon, the approximately $63.3 million contract is part of an overarching Air Force initiative that will also include ensuing critical design reviews. The weapon will use a rocket to achieve a hypersonic speed of nearly 4,000 miles per hour — the speed where the payload will then separate and glide the rest of the way. In addition, the system can be maneuvered while in flight but will not accelerate after the payload separation. The goal of this project is to develop a weapon that is effective, controllable, and affordable in response to the Pentagon’s growing concerns about the pace of Chinese and Russian development of hypersonic weapons.

The concept of breaking the military’s 20-year acquisition development cycle for advanced new weapons, such as fighter aircraft, emerged this past week from the Air Warfare Symposium. The concept is specifically related to the Next Generation Air Dominance (“NGAD”) program. Many believe that rather than spend the next decade developing a singular new air combat platform, the NGAD program could be better shaped to establish a pipeline for acquiring, developing, and fielding a host of new aircraft types, with a new design entering service as quickly as every two years. The thought is that instead of resting all hopes on a singular model, the alternative would allow Air Force leaders to hedge against the risk of technology breakthroughs, surprise enemies with unexpected new capabilities, and potentially result in cost reductions. While this idea was just floated this past week, no substantive decision has been made yet regarding the NGAD program.

Government Technology Solutions

Technology-focused defense, security, and infrastructure contractor, Parsons Corporation, is reportedly seeking to raise $500 million via an initial public offering (“IPO”), valuing the company at approximately $3 billion. The last government contractor IPO was by Booz Allen Hamilton in 2010 – a $238 million offering by the government consulting firm. The Virginia-based Parsons filed the required “S-1” paperwork with the Security and Exchange Commission (“SEC”) for an IPO, indicating a potential offering in April or May. The move would be the latest in Parsons’ accelerated growth strategy, which includes strategic acquisitions and the recent headquarters relocation to the Washington, D.C. area.

Big Movers

Maxar Technologies (Down 12.5%) – Share prices were down this week after the Company announced it plans to restructure its commercial geostationary orbit satellite business to place a greater emphasis on smaller satellites and government customers.

Textron (Down 6.2%) – Share prices were down again this week after Textron recalled around 200 off-highway vehicles due a fuel leak and fire hazard and another 700 due to a crash hazard.

Transactions

Boeing has acquired ForeFlight, LLC, a provider of innovative mobile and web-based flight planning and navigation software. The terms of the transaction were not disclosed.

Liberty Hall Capital Partners has acquired Onboard Systems, Inc., a provider of external cargo handling equipment for civil and military helicopters. The terms of the transaction were not disclosed.

Tribus Aerospace Corp. has acquired Midwest Precision Holdings Inc., a provider of precision manufacturing of complex components for aerospace, defense, energy, and engineered products markets. The terms of the transaction were not disclosed.

Tyto Athene, LLC, a portfolio company of Arlington Capital Partners, has acquired Island IT Consultants, a provider of information and communications technology support services to the Intelligence Community and other United States government agencies. The terms of the transaction were not disclosed. This acquisition represents the first for Tyto Athene since the company was formed last August through Arlington Capital Partners’ acquisition of Black Box Corp.’s Federal Government IT services business.

 

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Industry Week in Review – March 1, 2019

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KippsDeSanto & Co. Industry Week in Review – March 01, 2019

Industry Week in Review – March 1, 2019

Aerospace & Defense Update

President Trump is expected submit his 2020 defense budget proposal to Congress in the coming weeks. The total proposal is anticipated to be approximately $750 billion, representing a ~5%, or $34 billion, increase from 2019 defense spending levels. Of the projected $750 billion, $174 billion will be placed in the overseas contingency operations (“OCO”) to circumvent budget caps. The $750 billion is nearly the amount military leaders estimated would be sufficient to enact the National Defense Strategy and rebuild and modernize the U.S. military.

European aerospace giant, Airbus, is pursuing innovative strategies to differentiate itself in the space market as budget constraints and new market entrants from the U.S. and China have reduced the company’s market share over the past several years. Through its new partnership with American owned OneWeb communications, Airbus intends to shift its satellite manufacturing procedures from constructing large custom build spacecrafts to mass producing hundreds of inexpensive satellites. Airbus plans to install at least 650 satellites using OneWeb’s assembly line in Florida over the next several months with aspirations to later build satellite constellations for other satellite operators using the Florida facility.

Government Technology Solutions

In a move to be in closer proximity to its defense, intelligence, and critical infrastructure customers, Pasadena-based Parsons Corporation announced it is relocating its headquarters to Northern Virginia. Parsons already has 2,400 employees in the Washington, D.C. area—compared to 2,000 in its Pasadena location. CEO, Chuck Harrington, said they are strategically positioning themselves near key influencers: “Proximity to these influencers increases Parsons’ opportunities to advance our Enhance-Extend-Transform growth strategy and capitalize on our current momentum. Simply said, being in Northern Virginia gives us more opportunities to be in the right places, at the right times, with the right people driving the future of our markets.” The shift will neither result in moving the 2,000 employees out of Pasadena nor cutting jobs, according to CFO, Virginia Grebbien.

Big Movers

Maxar Technologies (Down 16.4%) – Share prices were down again this week after missing revenue expectations and the Company cutting its dividend.

Transactions

ManTech International Corp. has agreed to acquire Kforce Government Solutions, Inc. (“KGS”), a wholly-owned subsidiary of Kforce, Inc., a provider of information technology, transformation management, and data management solutions in support of federal health and defense customers. The deal is worth an estimated $115 million. KippsDeSanto & Co. is acting as the exclusive financial advisor to Kforce, Inc. on the divestiture of KGS.

Hexagon AB has agreed to acquire Thermopylae Sciences and Technology, LLC, a provider of geocentric web and mobile-based software products that work together to create user-focused, collaborative solutions for common problems. Terms of the transaction were not disclosed.

Teijin Ltd. has agreed to acquire Renegade Materials Corporation, a provider of heat-resistant thermoset pre-preg composites. Terms of the deal were not disclosed.

Windjammer Capital has acquired Hermetic Solutions Group, a provider of advanced hermetic packaging and components. Terms of the deal were not disclosed.

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Industry Week in Review – February 22, 2019

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KippsDeSanto & Co. Industry Week in Review – February 22, 2019

Aerospace & Defense Update

On Tuesday, United Launch Alliance (“ULA”) and its rival, SpaceX, split six launches awarded by the Air Force that amounted to approximately $750 million. The contracts were awarded by the Air Force’s Space and Missile Systems Center as part of the Evolved Expendable Launch Vehicle program. ULA, a joint venture between Boeing and Lockheed Martin, won a $442 million award for three launches, while Elon Musk’s SpaceX won a $297 million contract for the other three launches. Each company will be responsible for the entire launch ecosystem that includes everything from launch vehicle production to mission launch operations and spaceflight worthiness. The award continues a trend of the Air Force awarding launch contracts that balance rewarding low-price bids while also maintaining competition.

Lockheed Martin has unveiled a version of the F-16, named the F-21, specifically configured for the Indian Air Force (“IAF”) that would be built jointly with Tata Advanced Systems in India. The F-21 name is a trademark, not an official U.S. designation, and stands for “Fighter for the 21st century”. The India-specific F-21 incorporates technologies derived from those in its F-22 and F-35 fifth-generation fighters. However, the new designation highlights the commitment to delivering an advanced, scalable fighter aircraft to the IAF that also provides unrivaled industrial opportunities and accelerates closer India-U.S. cooperation on technologies. The new F-21 is competing for the future IAF order with the Boeing Super Hornet, Dassault Rafale, Eurofighter Typhoon, Saab JAS Gripen, and the United Aircraft MiG-35.

Government Technology Solutions 

This week, Microsoft announced it has been cleared for use within the Department of Defense (“DoD”) — allowing users to securely utilize Outlook and other mobile applications for classified data while remaining compliant with the DoD’s Cloud Computing Security requirements. Microsoft plans to advance its cleared government services work, offering new services capable of handling Impact Level 6 (“IL-6”) workloads in the near future.

Oracle’s protest of the $10 billion Joint Enterprise Defense Infrastructure (“JEDI”) contract has been paused so that the U.S. Court of Federal Claims can investigate potential conflicts of interest. The temporary hold is due to “new information not previously provided to DoD being disclosed, according to Pentagon spokesperson Elissa Smith. Claims have been made that two DoD officials—Deap Ubhi and Anthony DeMartino — involved in the procurement of JEDI, may have had conflicts of interest due to their prior work with Amazon Web Services (“AWS”). The pause is expected to further delay the award of the highly controversial cloud contract

Big Movers

Bombardier (Up 12.4%) – Share prices continued to surge this week following an announcement that the Company would invest $22 million CAD over a three-year horizon in two aerospace research projects: Aero21 and the SAGE project. These projects should have a beneficial impact on the greater aerospace community by bringing industry, government, and research partners together.

BAE Systems (Down 9.2%) – Share prices were down this week following Germany’s announcement of an arms ban on exports to Saudi Arabia. Germany assists in the production of the Eurofighter Typhoon, and its embargo could threaten the future of BAE’s pending £10bn deal to sell 48 new jets to Saudi Arabia.

Transactions

Capgemini SE has completed its acquisition of the commercial cyber-security arm of Leidos Holdings, Inc., which supports the security architecture demands of Fortune 500 companies, including integrated offerings for security combined with managed security services. Terms of the transaction were not disclosed.

FLIR Systems, Inc. has agreed to acquired Endeavor Robotics Holdings, Inc., a provider of battle-tested, tactical unmanned ground vehicles (“UGVs”) for the global military, public safety, and critical infrastructure markets. The deal is worth an estimated $385 million.

Rafael Advanced Defense Systems Ltd. And Avichai Stolero has acquired Aeronautics Ltd.,a provider of the manufacturing of drones for military uses. Terms of the transaction were not disclosed.

Safran S.A. has acquired the ElectroMechanical Systems Business from Collins Aerospace, a provider of pilot controls and electrical actuators for aircrafts. Terms of the transaction were not disclosed.

 

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