Industry Week in Review – February 27, 2015
Aerospace & Defense Update
On Monday, AAR Corp. announced that it has reached an agreement with TransDigm Group Incorporated to sell its Telair Cargo Group, comprised of Telair International, Telair U.S., and Nordisk Aviation Products. The deal, which features a purchase price of $725 million in cash subject to adjustments, is expected to close in the quarter ending May 31, 2015. When the transaction closes, AAR will report Telair Cargo Group as discontinued operations and is expected to recognize a pre-tax gain of $200 million. Moreover, the Company indicated that it intends to sell its Precision Systems Manufacturing business, resulting in an impairment charge of close to $40 million. AAR will now report its results in two new business segments. The Company’s Aviation Services segment will consist of Aviation Supply Chain and Maintenance, Repair, and Overhaul, while its Expeditionary Services segment will include Airlift and Mobility. Ultimately, the aforementioned transactions are expected to enhance AAR’s overall return profile, reshape its balance sheet, and return capital to shareholders, while refocusing the Company’s overall strategy.
The 12th biennial Australian International Air Show kicked off this week at the Avalon Airfield in Geelong, Australia. The 2015 Avalon Air Show features approximately 600 companies from 27 countries, and is expected to attract over 200,000 attendees. Companies will showcase their aerospace and defense products over the course of six days, with the first three restricted to industry experts and the remainder open to the general public. Notably, Russian companies, which have had a presence at the show in previous years, will be absent from this year’s event.
Government Technology Solutions Update
After the House of Representatives unexpectedly rejected a three-week Department of Homeland Security (“DHS”) spending bill, Congress and the President approved a one week funding extension late Friday night. The week long budget resolution averted a partial agency shutdown and bought time for the discussion of immigration provisions in Congress. Without passage of a funding bill by next Friday at midnight, 30,000 DHS employees will be furloughed, while 200,000 essential employees will continue to report to work without pay.
The Central Intelligence Agency (“CIA”) is preparing to launch a private app store with an offering of a few hundred apps designed to meet the Intelligence Community’s (“IC”) needs. The marketplace will supplement the functionality of the CIA’s recently completed private cloud environment. IC employees will be able to sample solutions before purchasing third-party subscription based offerings or directly download open source and intra-agency apps. The availability of apps will give IC analysts quicker access to solutions and services to allow agencies to stay competitive in a dynamic threat environment.
Big Movers
Bombardier, Inc. (Up 8.4%) – Shares were up this week after the Company completed its first flight of the CS300 jet and raised $868.0 million from an equity offering.
Boeing Company (Down 4.7%) – Shares were down this week after costs on the 787 Dreamliner and a possible downturn in jet demand caused Goldman Sachs to cut the stock’s rating to “sell.”
Transactions
Transdigm acquired AAR’s Telair Cargo Group which is comprised of Telair International, a manufacturer and on-board baggage and cargo handling systems for wide and narrow body aircrafts and Nordisk Aviation Products, a manufacturer of air cargo pallets and containers. The deal is worth an estimated $725 million.
Blue Wolf acquired North American Rescue, a manufacturer of lifesaving medical and rescue solutions for war fighters, tactical law enforcement professionals, and more. Terms of the deal were not disclosed.
iNovex Information Systems Inc. acquired the Mercury Intelligence Systems Inc., a subsidiary of Mercury Systems Inc. and provider of predictive analytics, cloud infrastructure, and analytical, software, and intelligence programs. Terms of the deal were not disclosed.
Computer Sciences Corporation acquired Autonomic Resources, LLC, a provider of cloud computing infrastructure. Terms of the deal were not disclosed.
