Industry Week in Review – April 4, 2014
This week, select U.S. military service groups sent Congress “wish lists”, called unfunded priorities or unfunded requirements, totaling approximately $36 billion in value of priority items that were not included in the Pentagon’s 2015 budget proposal. Rep. Buck McKeon, R-California, chairman of the House Armed Services Committee, requested the lists and received requests from the Army, Navy, Marine Corps, Air Force, Army National Guard, and Air National Guard. From the wish lists, notable requests include 22 additional Boeing EA-18 Growler aircraft for the Navy valued at $2.1 billion and 14 F-35 aircraft for the Air Force and Marine Corps valued at $1.4 billion. The wish lists also include multiple requests for upgrades, maintenance, and construction projects that have been reduced or deferred due to defense budget caps and sequestration cuts. Of the departments, the Army and Navy requested the largest amounts at $10.6 billion each. The requests are very similar to the White House’s Opportunity, Growth, and Security Initiative (“OGSI”) fund, which includes $26 billion in additional defense spending not included in the original $496 billion spending request. However, like the OGSI, officials have stated the actual passage of the proposed wish lists is highly unlikely, since defense spending is capped at $496 billion.
The Department of Veterans Affairs (“VA”) announced that it has cut its backlog of pending disability claims by more than 40%, with backlog now at its lowest point since March 2011. The VA also announced that veterans are waiting an average of 119 days less for a decision regarding disability benefits than they were a year ago. The agency cited transformation initiatives and streamlined business processes as key contributors to the reduction in backlog and wait times, and reiterated its goal of eliminating the claims backlog by 2015, which would indicate continued demand within the VA for innovative IT solutions over the near-term.
Big Movers
Babcock International Group PLC (Up 9.2%) – Shares were up this week after the Company announced it will acquire Avincis Mission Critical Service Holdings SLU from Kohlberg Kravis Roberts & Company for approximately $1.5 billion.
Relevant Transactions
Arotech Corporation acquired UEC Electronics, LLC, a provider of electronic components and subsystems for military, aerospace, and industrial customers. The acquisition allows Arotech to pursue new market opportunities with new customers, as well as strengthen its electronic engineering and manufacturing capabilities. UEC will be integrated into Arotech’s Battery and Power Systems division.(1)
MB Aerospace acquired Norbert Industries, Inc., a provider of machined components for aerospace, defense, automotive, machine tool, and robotic industries. Terms of the deal were not disclosed.
Levine Leichtman Capital acquired NOBLES Worldwide, Inc., a provider of weapon systems and ammunition feed systems to various branches of the U.S. military and its allies worldwide. Terms of the deal were not disclosed.
(1) KippsDeSanto & Co. acted as the exclusive financial advisor to UEC Electronics, LLC.
