Industry Week in Review – December 16, 2016

Aerospace & Defense Update

Boeing recently announced that it will move its’ Defense, Space, & Security business unit headquarters from St. Louis, Missouri to the Washington, D.C. area next year.  While only ~12 individuals from the senior leadership team will initially be transferred to the new headquarters, Boeing expects an additional 50 members of the defense team to be transferred over time.  The strategic decision to be in closer proximity to the Pentagon and on Capitol Hill is intended to strengthen Boeing’s relationships with its major customers and the decision makers who affect the industry.

Additionally, Boeing announced that it will reduce the production of its 777 jetliner to 5.0 aircraft per month starting in August 2017, a 40% reduction from its current rate of 8.3 aircraft per month.  The production rate is expected to drop even further in 2018 to 3.5 aircraft per month as Boeing begins to prepare for the production of the new 777X in 2020.  Thought to be a response to the slowing global sales of big jetliners, this steep cut in production is expected to slash revenue and result in significant job reductions during 2017.  However, despite this decision, Boeing plans to increase its dividend by 30% and authorized $14 billion in share repurchases over the next two years to help buoy its stock price.

Government Technology Solutions Update

Since being awarded by the Department of Homeland Security (“DHS”) in late November, the $1.5 billion Flexible Agile Support for the Homeland (“FLASH”) contract has been protested by five contractors.  The vehicle was awarded to 13 agile software companies (out of more than 100 bidders) in hopes to create a more digital government.  Awardees were selected based on qualifications across data collaboration, code development, integration support, data migration, DevOps, and metric reporting.  The award has a one-year base and two one-year options and was developed in response to the 2012 presidential memorandum “Building a 21st Century Digital Government”.  A decision on the protest is expected by March 20th, with the expectation that the number of protests could grow significantly over the coming weeks.

In Government Fiscal Year 2016 (“GFY16”), the Government Accountability Office (“GAO”) ruled in favor of companies challenging Federal procurements more often than any other year since the GAO began recording data in 2001.  The GAO sided against Federal agencies’ initial award of contracts and task orders in 139 complaints, representing ~23% of cases, up sharply from ~12% in 2015, but below the 27% high mark set in 2007.  The most common reasons the GAO ruled in protestors’ favor related to unreasonable technical capabilities, past performance, or cost and price.  GFY16 also represents the first time in more than five years that Federal agencies unanimously complied with the GAO’s recommendations.  This news comes as President Obama recently signed into law HR 5995, which permanently reinstates the GAO’s jurisdiction over protests of civilian task orders, which expired at the end of GFY16.

Big Movers

Airbus (up 6.8%) Shares were up this week after Germany received its first tactical A400M transport plane from Airbus.

Teledyne (down 3.5%) – Shares were down this week after Teledyne announced its plans to acquire e2v technologies.


Advanced Core Concepts acquired International Logistics Group, a provider of engineering and technical support, logistics, sustainment services, acquisition support, and IT solutions to the Department of Defense (“DoD”) and other Federal customers.  Terms of the transaction were not disclosed.

Aircraft Technical Publishers (“ATP”) has acquired CaseBank Technologies, Inc., a provider of integrated diagnostic, troubleshooting, and fault detection solutions for the aerospace and defense industries.  Terms of the deal were not disclosed.

Allcom Global Services acquired Delex Fairfax Integrated Security Systems (“DFISS”), a provider of sophisticated security software and systems as well as technology infrastructure solutions for Federal and commercial customers.  KippsDeSanto & Co. served as the exclusive financial advisor to DFISS.  Terms of the deal were not disclosed.

HDT Global, Inc. has acquired DRS Environmental Systems, Inc., a provider of rugged and transportable mobile enclosures, environmental control and decontamination units, power generators, and other ground support systems for forward deployed troops and first responders.  Terms of the deal were not disclosed.

Industrial & Financial Systems (“IFS”) AB has agreed to acquire Mxi Technologies Ltd., a provider of integrated and intelligent maintenance management software solutions for the global aviation industry.  Terms of the deal were not disclosed.

Marana Aerospace Solutions, Inc. has acquired Ascent Aviation Services Corp., a provider of heavy maintenance services, aircraft modification, transition, and refurbishment work for the aerospace industry.  Terms of the deal were not disclosed.

Teledyne Technologies, Inc. has agreed to acquire e2v technologies plc, a provider of high performance image sensors, custom camera solutions, and application specific standard products for the machine vision market.  The deal is worth an estimated $789 million.

Click here to review comparable company analysis.