Aerospace & Defense Update
Space Exploration Technologies Corporation (“SpaceX”) raised $1 billion in a financing round with two investors, Google and Fidelity Investments. Google took down $900 million of the financing in exchange for a 7.5% stake in SpaceX. The financing was done at an implied valuation of $12 billion. The cash is intended to be used for research and development of spacecraft and satellites. The new investors join the Founders Fund which includes Draper Fisher Jurvetson, Valor Equity Partners, and Capricorn.
This week, Textron Aviation agreed to purchase assets of UTC’s Aerospace Systems unit in Wichita. The unit designs and manufactures interior furnishing for Citation business jets and King Air turboprop airplanes. The transaction follows the sudden departure of the UTC CEO, Louis Chenevert, and the CEO of the UTC Aerospace Systems division, Alain Bellemare. These shifts in corporate leadership led to the appointment of Gregory Hayes, previously CFO, to replace Chenevert and the hiring of a new head of strategic planning. The combination of these corporate structure changes may signal further portfolio restructuring through a range of strategic actions including mergers and acquisitions executive departures.
Government Technology Solutions Update
The Small Business Administration (“SBA”) has proposed a new rule which, if passed, would allow small companies to go after larger government contracts. Currently, most set-aside small business contracts require the winning company to perform at least 51% of the work. However, under the new rule, small business contractors would be permitted to team up to meet this goal. This would open up new and larger value opportunities for small businesses to capture. The SBA is also proposing a standardization of how the percentage of performed work is calculated and has created a pilot small business teaming environment to identify best practices, hurdles, and tools to facilitate partnerships.
Earlier this month, the Defense Information Systems Agency (“DISA”) loosened security restrictions on cloud based environments to allow the use of public cloud services in some cases. DISA is now willing to accept some increased risk for the cloud migration of less mission critical data in order to capture increased agility and technological benefits. Department of Defense (“DoD”) data will now be classified into three levels in order to determine security requirements. In conjunction with the recent policy which gave individual DoD agencies cloud procurement power, this change in policy will speed up DoD cloud migration.
Bombardier, Inc. (Down 6.4%) – Shares were down this week after the Company announced it will temporarily lay off workers from its railcar plant in Quebec.
L-3 Communications Holdings Inc. acquired MITEQ Inc., a manufacturer of specialized RF microwave products and solid-state SATCOM components. The deal is worth an estimated $41 million.
Safariland, LLC acquired Atlantic Tactical, Inc., a distributor of life-saving equipment and uniforms for law enforcement and public safety officers. Terms of the deal were not disclosed.
Sarcos LC acquired the Raytheon Sarcos unit of Raytheon Company, a developer of robotics, micro-electro-mechanical, and sensor technologies for use in health care, life sciences, telecommunications, robotics, and defense industries. Terms of the deal were not disclosed.