Industry Week in Review – February 21, 2014

International sales continue to play an important role in 2014 within the aerospace and defense industry as companies look to diversify revenue and operations amidst domestic budget uncertainty.  This week, Sikorsky and Boeing both inked multi-billion dollar international deals.  The Turkish government and Sikorsky signed a contract for 109 Sikorsky T-70 Black utility helicopters in a deal worth an estimated $3.5 billion.  The majority of the aircraft will go to the Turkish Armed Forces, with Army, Navy, Air Force, and Special Forces receiving the remainder.  Australia agreed to purchase eight of Boeing’s P-8A Poseidon long-range maritime reconnaissance planes in a deal worth an estimated $3.6 billion.  The purchase is aimed to boost Australia’s ability to patrol its 2.5 million square kilometer marine jurisdiction, part of a growing trend by Asia-Pacific nations to protect commercial maritime interests as tensions in the region continue to rise.  Both sales provide an important boost for Sikorsky and Boeing’s defense divisions, which experienced a down year in 2013 due to cuts in defense spending.

In a continued effort to address the growing cybersecurity threat, Defense Secretary Chuck Hagel announced Tuesday that the Department of Defense’s cyber budget will receive an increase in requested funding for GFY15.  Secretary Hagel noted that the Pentagon “will increase spending to help improve its cyber capabilities, including a larger focus on cyber security, intelligence gathering, and reconnaissance,” in order to combat the growing frequency of cyber-based attacks which some defense officials have called the greatest threat to U.S. national security.  Hagel’s announcement underscores the continued opportunity for contractors operating in this priority market.

Big Movers

NCI Inc. (Up 27.8%) – Shares were up this week after analysts raised the consensus fiscal year 2014 earnings estimate from $0.40 per share to $0.49 per share, representing an increase of 22.5%.

Relevant Transactions

Ultra Electronics Holdings plc acquired 3Phoenix, Inc., a provider of sensor and processing systems in the areas of sonar, radar, intelligence, surveillance, and reconnaissance.  Ultra Electronics paid $70 million for the acquisition.

ManTech International Corporation acquired Allied Technology Group, Inc., a provider of engineering and information management solutions to civilian, military, and intelligence agencies.  Terms of the deal were not disclosed.

Tangible Security, Inc. acquired A & N Associates, Inc., a provider of information assurance and acquisition management services to defense, intelligence, and federal agencies.  Terms of the deal were not disclosed.

Camber Corporation acquired Avaya Government Solutions’ IT Professional Services Business, a provider of full lifecycle support services to Federal government customers.  Camber paid $100 million for the acquisition.

Sapient Government Services, a division of Sapient Corporation, acquired OnPoint Consulting, Inc., a provider of technology and management consulting solutions in the areas of cybersecurity, enterprise architecture, and infrastructure systems to civilian and defense agencies.  Terms of the deal were not disclosed.(1)

(1) KippsDeSanto & Co. acted as the exclusive financial advisor to OnPoint Consulting, Inc.

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