Industry Week in Review – December 25, 2015

Aerospace & Defense Update

SpaceX, led by Elon Musk, completed a historic feat by launching an updated version of its Falcon 9 rocket and then landing a large portion of the rocket back on earth.  This unprecedented accomplishment comes just six months after a high-profile launch explosion of its Falcon 9 rocket.  The launch this past Monday delivered 11 commercial satellites into low-earth orbit and then used its thrusters to carefully land the rocket back on earth.  Typically, a large portion of the rockets either fall into the sea or burn up into the atmosphere, however, this accomplishment paves the way for the its goal of developing a reliable fleet of reusable rockets.  The ability to reuse the largest and most expensive sections of boosters can provide significant cost savings and can change the landscape of the industry.

Frank Kendall, the Pentagon’s acquisition chief, stated that the Pentagon and other U.S. government agencies are weeks away from completing a proposal to allow regulators to block proposed mergers based on national security reasons.  Previously, regulators were only allowed to halt potential mergers based on antitrust reasons.  This development followed Kendall’s statements in September, days after the U.S. Justice Department approved Lockheed Martin’s acquisition of Sikorsky Aircraft, when he cited concerns about consolidation in the defense industry reducing innovation and competition.  However, industry giants, such as Lockheed Martin, claim there is no evidence that consolidation will reduce innovation or competition.  Kendall believes it is “unclear” whether or not this proposal will get passed, especially since it will be considered during an election year.

Government Technology Solutions Update

The Department of Defense (“DoD”) recently announced the award of the Cyber Security and Information Systems Technical Area Tasks (“CS TAT”) contract.  The Multiple Award Contract (“MAC”) indefinite delivery / indefinite quantity (“IDIQ”) vehicle has a contract ceiling of $5 billion over 5 years.  Ten contractors were awarded on a Full and Open (“F&O”) basis, while six companies were awarded under a Small Business (“SB”) set-aside basis.  The contract falls within the DoD Information Analysis Centers (“IAC”), and focuses on providing information assurance and management, cyber security, and modeling and simulations.  The vehicle will be available to all agencies, departments, services, and directorates under DoD, and is part of a larger DoD effort to stimulate innovation and technological research across the department.

In order to better utilize and manage new and advancing technologies, the Environmental Protection Agency (“EPA”) is reorganizing its Chief Information Officer’s (“CIO”) office.  This is the office’s first reorganization in over 16 years, as low budgetary visibility created barriers to internal reform.  According to Ann Durkin, EPA’s CIO, the reorganization will focus on the better provision of digital services to external users and constituents.  It anticipates doing so by creating new offices, such as the Office of Customer Advocacy, Policy, and Portfolio Management, as well as the Office of Enterprise Information Programs, devoted to improving the external user’s access and the EPA’s own management of information and services.  The EPA’s reorganization reflects broader trends within the Federal Government, including the Federal IT Acquisition Reform Act, which called for the reorganization of CIO offices across the Federal Government.

Big Movers

Harris Corporation (Up 8.2%) – Shares were up this week after the company received a $66 million in orders to provide a Middle East nation with the Falcon III wideband tactical radios and accessories.

HEICO Corp. (Up 10.4%) – Shares were up this week as the company announced it will acquire Robertson Fuel Systems for $255 million.


Cubic Corporation acquired TeraLogics, a provider of real-time Full Motion Video processing, exploitation, and dissemination for the DoD, Intelligence Community, and commercial customers.  The transaction is worth an estimated $39 million. KippsDeSanto & Co. acted as the exclusive financial advisor to TeraLogics, Inc.

Cubic Corporation to acquire GATR Technologies, a provider of inflatable satellite communication antennas and terminals that enable deployment and high-bandwidth communications in remote and hard-to-reach areas.  The transaction is worth an estimated $233 million.

HEICO Corporation to acquire Robertson Fuel Systems, a designer, developer, and manufacturer of primary and auxiliary fuel systems for rotary and fixed winged aircraft and ground combat vehicles.  The transaction is worth an estimated $255 million.

Apax Partners to acquire the Commercial Satellite Communications Business of Airbus Group SE, a provider of satellite communication services for the maritime, mining, energy, and other markets.  The terms of the deal were not disclosed.

Kongsberg Maritime to acquire Ship Modelling & Simulation Centre AS, a provider of maritime courses and simulation of marine operations.  The terms of the deal were not disclosed.

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