Industry Week in Review – April 20, 2012

A recent DoD report, released on April 18, suggests that Congress should lift restrictions on commercial satellite exports to eliminate existing headwinds in the U.S. space manufacturing market.  Currently, commercial satellite exports are regulated by the U.S. Munitions List (“USML”), grouped with other defense-related artifacts such as firearms, missiles, military vehicles, and warfighter training equipment.  The Obama Administration’s current proposal suggests moving commercial satellites to the Commerce Department’s Commerce Control List in an effort to reduce pressure on the U.S. commercial satellite industry and alleviate associated risks to broader national security.  The revision of the regulations is part of a comprehensive strategy to rebuild the USML and introduce new export control reforms, with an overall goal to create “higher walls around fewer items.”

In a related story, the Air Force announced this week its intention to launch the second Advanced Extremely High Frequency (“AEHF”) communications satellite on May 3, as part of the effort to replace the legacy Milstar constellation and provide secure, high-integrity, jam-resistant communication support to senior military and government officials.  The third AEHF satellite is expected to launch in September 2013, a fourth satellite is on contract, and two more are expected to be procured by the end of the upcoming summer.

Big Movers

MAXIMUS, Inc. (Up 7.0%) – Shares rose this week after the company announced that it has signed a definitive agreement to acquire Denver, CO-based Policy Studies Inc. (“PSI”) for $67 million.  PSI helps administer various government health programs, including Medicaid and the Children’s Health Insurance Program, welfare-to-work programs, and child support enforcement initiatives.  The acquisition is expected to help bolster MAXIMUS’ position in the increasingly lucrative government health market.

TransDigm Group Incorporated (Up 5.4%) – Shares rose this week after analysts reported confidence that the company will raise adjusted earnings-per-share (“EPS”) estimates meaningfully during reports next month.  Analysts rationalize the higher EPS estimates through a combination of further McKechnie upside, AmSafe accretion, and continued aftermarket strength.

Relevant Transactions

HEICO Subsidiary Radiant Power Corp. acquires the aerospace assets of Mortiz Aerospace, a designer / manufacturer of next generation wireless cabin control systems, solid state power distribution and management systems, and fuel level sensing systems for business jets, military / defense aircraft, and general aviation consumers.  The acquisition enables Radiant Power to provide a full suite of power control and cabin electronics solutions.  Terms of the deal were undisclosed.

Venture Aircraft, LLC acquires certain assets of Swift-Cor Aerospace, Inc., a producer of precision computer numerical control (“CNC”) machined and sheet metal parts, as well as assemblies, for commercial jets, business jets, and military aircraft, among other aerospace platforms.  The combined entity will now operate as Impresa Aerospace; management views the acquisition as instrumental towards being able to tackle growing demand driven by rapidly increasing aircraft build rates.  Terms of the deal were undisclosed.

Waveland Investments acquired NTE Aviation, an aftermarket reseller of airplane engine and airframe components.  NTE engages in the sourcing and reselling of engine and airframe parts to / from MRO facilities, OEMs, airline operators, and leasing companies.  The company is well recognized within the aviation industry as a specialist in the regional airline turboprop engine and airframe segment, in addition to Boeing 737 Classic applications.  Terms of the deal were undisclosed.

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