Aerospace & Defense Update
Two days before President Trump’s visit to Boeing’s South Carolina facility for the debut of Boeing’s 787-10 Dreamliner aircraft, 74% of the workers at the facility voted against unionization. Union organizers with the International Association of Machinists and Aerospace Workers were unsuccessful in their efforts to unionize the workforce. Workers in Boeing’s South Carolina facility currently earn ~1/3 less than unionized counterparts. The Company began manufacturing aircraft in South Carolina in 2011 after a debilitating eight-week strike by 27,000 unionized workers in Washington state a few years earlier. Analysts speculate Boeing placed the production of the 787-10 Dreamliner aircraft in South Carolina to reduce the leverage of the work force in Washington state.
This past week, U.S. Defense Secretary James Mattis demanded that the North Atlantic Treaty Organization’s (“NATO”) allies increase their defense spending by the end of 2017 to at least 2% of their gross domestic product (“GDP”). Mattis stated that the Trump administration would “moderate its commitment” to countries that have not increased spending by year end. The U.S. currently spends more on defense spending than all other countries combined (~3.6% of the U.S. GDP) and the Trump administration aims to have more sharing of military costs among NATO allies. NATO Secretary-General Jens Stoltenberg believes the consensus among allies is to comply with Mattis’ ultimatum. Despite President Trump’s recent praises of Russia, Trump and Mattis reassured Stoltenberg that the U.S. is still committed to supporting NATO and its allies.
Government Technology Solutions Update
The National Institutes of Health Information Technology Acquisition and Assessment Center (“NITAAC”) has been working to make the CIO-CS contract a much more attractive vehicle for prospective Federal agencies which may be seeking to procure cloud computing services. Throughout the past year, NITAAC has used two main mechanisms in order to make this happen. NITAAC first lowered the CIO-CS contract access fees, from 0.5% to 0.35%. More recently, at the end of January, NITAAC released a statement saying that they would be lowering the cap on the access fee for the CIO-CS contract to $70,000, as long as it was for an order with a base or option period ceiling greater than $20 million. The organization has also been working with the industry and cloud service providers to create a more streamlined procurement process by asking providers how their services could best be used to service various agencies across the Federal government. These efforts have started to pay off, with the Department of Veterans Affairs (“VA”) using CIO-CS to issue its Enterprise Cloud Services for IT Infrastructure Modernization contracts. According to industry insiders, NITAAC hopes that, with cheaper and more streamlined ways to access CIO-CS, an increased number of government agencies will make it their vehicle of choice for major cloud service acquisitions.
According to recent reports, several Federal agencies have already begun work on transitioning their IT and telecom infrastructure solutions from the legacy Networx vehicle to the new $50 billion Enterprise Infrastructure Solutions (“EIS”) vehicle. Leading the way in this transition is the United States Department of Agriculture (“USDA”), who began the transition process back in 2014. According to Federal guidelines, agencies have until March of 2020 to make the shift from Networx to EIS. The General Services Administration expects that awards on EIS will be made soon, sometime in the spring of 2017. According to industry insiders, other Federal agencies, such as the Department of Justice (“DoJ”), have been issuing requests for information to figure out how various vendors could potentially meet their needs. As they gather more information, agencies such as the USDA and the DoJ will be getting a clearer picture on how they can leverage EIS to modernize and find efficiencies in their IT and telecom networks, potentially fundamentally changing how they are able to perform their core functions in the future.
LMI Aerospace (up 51.8%) – Share prices were up this week after the Company announced it entered into a merger agreement to be acquired by Sonaca Group.
Zodiac Aerospace (down 6.2%) – Share prices were down this week after an activist hedge fund voiced its opposition to Safran’s acquisition of Zodiac Aerospace.
Convergence Technology Consulting, LLC has acquired Deep Run Security Services, LLC, a provider of cyber security services, cyber risk management, cyber due diligence for mergers and acquisitions (“M&A”), and other consulting services. Terms of the deal were not disclosed.
Sonaca S.A. has agreed to acquire LMI Aerospace, Inc., a provider of structural assemblies, kits, components, and engineering services to the commercial, business, regional, and military aerospace markets. The deal is worth an estimated $191.0 million.
Verizon Communications Inc. has acquired Skyward, a provider of a drone management platform that help industries use drones to plan their flights, avoid restricted airspace, and register aircraft with the Federal Aviation Administration (“FAA”). Terms of the deal were not disclosed.