Industry Week in Review – July 12, 2019

KippsDeSanto & Co. Industry Week in Review – July 12, 2019

Industry Week in Review – July 12, 2019

Aerospace & Defense Update

The White House has called for increased funding for the Next-Gen Overhead Persistent Infrared (“OPIR”) system in response to a smaller budget than previously anticipated.  OPIR satellites are a space-based early warning missile system that provide enhanced missile warning capabilities for the Space Based Infrared System.  The House Armed Services Committee (“HASC”) authorized $1 billion to the project for FY2020, approximately $400 million less than the Pentagon’s request of $1.4 billion.  The Trump administration believes delayed funding will result in increased long run costs of at least $450 million, while the HASC is concerned about the rapid budget growth in relation to the project. Northrop Grumman and Lockheed Martin have been contracted by the Air Force to build the satellites.

Following the unveiling of Airbus’s extra-long range version of its A321 aircraft, Boeing is expected to release a new comparable midmarket aircraft that will begin carrying passengers by 2025, more than two years after Airbus’s model is anticipated to hit the commercial market.  Demand for such mid-sized aircraft has increased as the development of long-range narrowbody jets will enable airlines to offer low-cost options for distances of up to 5,000 miles that previously required large, inefficient widebody planes.  This trend has put pressure on lessors, as the market for older, larger aircraft has dwindled in respect to the newer models.  Lessors, many of whom are heavily invested in the widebody aircraft sector, must adjust to the shifting market trends towards smaller, more efficient aircraft.  The change marks an improvement for both airlines and passengers, who are poised to benefit from the lower costs associated with the fuel-efficient, long-range aircraft.

Big Mover(s)

ICF International, Inc. (Up 3.7%) – Share prices were up this week after the Navy awarded ICF International a multiple award Cyber Services IDIQ contract valued up to $330 Million

Astronics Corporation (Down 4.6%) – Shares prices were down this week after it was announced that Astronics signed a definitive agreement to sell its Airfield Lighting Product Line

Transactions

 3D Plus has acquired BERNIER S.A.S, a provider of the design and manufacture of interconnected products used in demanding defense, aerospace, and industrial applications, primarily for communications-related purposes.  Terms of the transaction were not disclosed.

 Acorn Growth Companies has acquired Black Sage Technologies, Inc., a provider of the development, integration, and deployment of counter-unmanned aircraft systems (“C-UAS”) solutions which identify, classify, track, and defeat UAS threats.  Terms of the transaction were not disclosed.

ATL Partners and the British Columbia Investment Management Corporation has acquired Valence Surface Technologies, LLC, a provider of aerospace surface finishing services.  Terms of the transaction were not disclosed.

ESCO Technologies, Inc. has acquired Globe Composite Solutions, LLC, a provider of mission-critical composite-based products and solutions for navy, defense, and industrial customers.  Terms of the transaction were not disclosed.

Hughey & Phillips has agreed to acquire the airfield lighting product line of Astronics Corporation, which provides lighting products used on airfields.  Terms of the transaction were not disclosed.

ITT, Inc. has acquired Matric Composites, Inc., a provider of precision composite components for next generation aircraft, aircraft engine platforms, and defense applications.  The deal is valued at an estimated $29 million.

Kellstrom Defense Aerospace has acquired TAVCO, Inc., a provider of the design and manufacture of proprietary pneumatic controls and pressure vessels for the aerospace and defense market.  Terms of the transaction were not disclosed.

Prototek Sheetmetal Fabrication, a portfolio company of CORE Industrial Partners, has acquired Cal-X, Inc., a provider of sheet metal fabrication and precision machining services, with a focus on rapid prototyping and short-run production.  Terms of the transaction were not disclosed.

SMART Global Holdings, Inc. has acquired the embedded computing business of Artesyn Embedded Technologies, Inc., which provides embedded computing systems for original equipment manufacturers and systems integrators.  The deal is valued at an estimated $80 million.

SOS International, LLC has acquired Vykin Corp., a provider of IT and operational intelligence within the Defense, Federal, and Intelligence Community market spaces.  Vykin is certified by the National Security Agency to integrate commercial network offerings in classified environments.  The company has a presence in the Pacific and Southwest Asia regions, as well as Europe.  Vykin marks the contractor’s fourth acquisition in the past four years.  Terms of the transaction were not disclosed.

Vectrus, Inc. (NYSE:VEC) has acquired Advantor Systems Corp., a provider of integrated electronic security systems to the federal government from Infrasafe and McCarthy Capital.  Advantor is the sole source exclusive provider of integrated C3 networked services to the U.S. Forces Korea as well as the security provider of choice for the F-35 Joint Strike Fighter program with Japan’s Ministry of Defense.  “This expands Vectrus’ client and geographic footprint, allowing for greater cross-selling opportunities,” said Mr. Chuck Prow, CEO of Vectrus.  The transaction is worth an estimated $44 million and was funded by cash on hand and Vectrus’ credit facility.

 

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