Industry Week in Review – December 2, 2011
This week, the Obama administration released a proposed 2013 base defense budget of $523.4 billion with an additional $82.5 billion for contingency operations, a combined one-year reduction of about $47 billion in the base budget. The bill, which still must be approved by Congress, represents progress in a time of government stand-still and provides a more optimistic view of the government’s ability to finalize budgetary decisions in the wake of the recent Super Committee failure.
Central banks from developed nations took action to ease strains in financial markets by lowering the price on existing temporary U.S. dollar liquidity swap arrangements. The move makes dollar funding cheaper for European banks that hold dollar-denominated securities or make U.S. dollar loans, but does not fix systemic European debt issues. The arrangement also signifies the possibility of future coordinated actions by Central banks if global economic conditions worsen.
American Airlines filed for Chapter 11 bankruptcy after the company announced that it failed to “achieve a cost and debt structure that is industry competitive and thereby assure long-term viability.” The third largest airline by traffic was unable to shrink the cost gaps between itself and its largest competitors after widespread industry consolidation followed the 2001 terrorist attacks.
Big Movers
Rheinmetall AG (Up 20.4%) – Shares are up this week after the company won a major order from Russian Ministry of Defense to build an army training center in Mulino, Russia worth about $134 million. The facility is expected to be complete by 2014 and have the capability of training 30,000 troops a year in a simulation-supported center. The deal expands Rheinmetall’s footprint in the Russian market.
Boeing Co. (Up 13.6%) – Shares are up this week after analysts initiated coverage with a “Buy” rating as manufacturing and production is expected to increase. Boeing recently announced two of the largest orders in the company’s history.
Recent Acquisitions
Astronics Corporation acquired Ballard Technology, a provider of avionic interface solutions for defense and commercial aerospace applications for $24.0 million with an earn-out of up to $5.5 million if Ballard achieves certain revenue growth targets. The acquisition advances Astronics strategy to develop and maintain positions of technical leadership while diversifying its products and technologies. Ballard is projecting 2011 annual revenue of approximately $11.0 million. KippsDeSanto acted as the sole financial advisor to Ballard Technology.
Sotera announced the acquisition of Potomac Fusion, Inc., a provider of data analytics, cyber and visualization solutions for U.S. Intelligence Community and Department of Defense. The acquisition expands Sotera’s capabilities to address evolving requirements of national security customers.
Microsoft acquired VideoSurf, Inc., a provider of a video search engine that allows users to search and discover videos from massive amounts of visual data for an estimated $100 million. The back-end computer vision technology that “sees” frames inside videos to make discovering content fast, easy and accurate will be integrated across Microsoft’s entertainment platform including Xbox 360 and Xbox LIVE.
Twitter acquired Whisper Systems, A provider of security and management solutions that transform consumer phones and tablets into enterprise-ready devices. The acquisition expands Twitter’s data protection and security capabilities. More importantly, the acquisition gives Twitter access to famed security researcher Moxie Marlinspike, founder of and one of two employees at Whisper Systems.
TE Connectivity Ltd. to buy Deutsch Group SAS, a provider of heavy-duty electronic connectors for about $2.6 billion. The acquisition expands TE Connectivity’s presence in the defense and industrial transportation markets.
