Industry Week in Review – January 6, 2017
Aerospace & Defense Update
President Elect Trump has made strong remarks about indicating a desire to increase the U.S. Navy’s ship count by 28%, from its current 274 to 350. Based on these remarks, the U.S. Navy stands to be a substantial ‘winner’ in gaining additional funding in the coming years. Trump’s recent comment referring to China as an enemy of the U.S. would create an increased need for a strong presence in the Pacific Ocean. Additionally, as Trump continues to propagate the idea for nuclear modernization, the Navy’s Columbia-class ballistic submarine may receive additional attention. In contrast to these positive messages for the Navy, key Army and Air Force missions have been the rhetorical target of the President Elect. Trump has sought to smooth ties with Russia, which would eliminate one of the Army’s main mission areas in Europe and has criticized the extensive cost for the Air Force One and F-35 aircraft.
SpaceX plans to resume rocket launches as early as January 8th by launching 10 Iridium Communications satellites. This comes after an unmanned Falcon 9 rocket explosion during fueling back in September, which caused the destruction of a $200 million satellite. SpaceX originally aimed to have the rocket operational by November, but delays have pushed the reintroduction date into 2017. The Company believes faulty fuel procedures caused a failure inside a second stage helium bottle, which caused the Falcon 9 rocket to explode.
Government Technology Solutions Update
Shaun Donovan, the outgoing chief of the Office of Management and Budget (“OMB”) released an exit memo on Thursday in which he advised Presidential-elect Trump’s transition team to follow the precedent set by President Obama in making information technology (“IT”) modernization a priority in the new administration. Currently, Trump’s stance on IT modernization is still somewhat unclear, as is that of Rep. Mick Mulvaney, the nominee chosen to replace Donovan as head of the OMB. However, Mulvaney has shown an appetite for reducing costs and increasing Federal reliance on private outsourcing, both of which could be achieved to some degree by continuing IT modernization efforts. Some of these initiatives include an increase in usage of cloud-based services and solutions and platforms-as-a-service, among others, which may work to create a suite of increasingly commoditized and reusable solutions. By streamlining and simplifying the way in which Federal IT solutions are created and delivered, the OMB hopes to drive down costs. According to Donovan, IT modernization initiatives carried out in the past eight years have been responsible for saving the Federal government up to $4.7 billion in aggregate.
The General Services Administration (“GSA”) issued a request for information (“RFI”) under its Unified Shared Services Management (“USSM”) office, seeking industry input on if, and to what degree, software-as-a-service (“SaaS”) solutions can be used to handle certain back office administrative functions for the Federal government. According to the GSA, these would primarily be focused on meeting needs for shared services such as financial management, human resources, or acquisitions. The RFI wanted further industry input on whether or not these SaaS solutions, if developed, could be delivered in a modular capacity, increasing interoperability between Federal agencies. Part of the rationale behind this would be that, in creating services and solutions which can be streamlined and easily shared, back-office administrative functions can become cheaper and less complex. The GSA plans to field responses to this RFI through to the end of February.
Big Movers
Raytheon (up 4.4%) – Shares were up this week after Raytheon won a $163 million contract for training services to Qatar.
Sturm, Ruger & Company (up 2.8%) – Shares were up this week after the Company announced it had repurchased ~280,000 shares during the fourth quarter.
Transactions
Airborne Maintenance and Engineering Services, Inc. has acquired PEMCO World Air Services, Inc., a provider of heavy maintenance, repair, and overhaul aircraft services and passenger-to-freighter aircraft conversion solutions. Terms of the deal were not disclosed.
BBA Aviation’s Aircraft Management and Charter Business to merge with U.S. Business of Gama Aviation plc, a provider aircraft management services for aircraft owners, such as fuel and insurance, crew, and maintenance services. Terms of the deal were not disclosed.
Belcan, LLC, a portfolio company of AE Industrial Partners, has acquired The Kemtah Group, Inc., a provider of IT support services, enterprise-wide IT services, software development, and cybersecurity solutions for the Federal government. Terms of the deal were not disclosed.
Corbel Capital Partners closed a non-control investment in ARES Security Corporation, a provider of products and services used to prevent, detect, and assess risks to critical infrastructure for Federal government clients. Terms of the deal were not disclosed.
Dynetics, Inc. has acquired Camber Corp.’s stake in Aviation and Missile Solutions, LLC (AMS), a provider of engineering and precision technology solutions to Defense and Intelligence agencies. Terms of the deal were not disclosed.
Macaulay-Brown, Inc. has acquired Enlighten IT Consulting, Inc., a provider of advanced and mission-critical big data infrastructure, secure cloud engineering, and analytic solutions for Federal, state, and local government clients. Terms of the deal were not disclosed.
The Phacil Employee Stock Ownership Plan (ESOP) has acquired Phacil, Inc., a provider of software services, systems engineering, integration & operations, cybersecurity, and service desk operations solutions primarily to Federal government clients. Terms of the ESOP were not disclosed.
Puglia Engineering, Inc. has acquired the San Francisco Ship Repair, Inc. business of BAE Systems, a provider of maintenance, alteration, and repair services to cruise liners, military support vessels, local bay traffic, bulk carriers, and container ships. Terms of the deal were not disclosed.
Rockwell Collins, Inc. has acquired Pulse.Aero Ltd, a provider of self-service bag drop solutions and airline applications to enhance the company’s passenger processing services for airports and airlines. Terms of the deal were not disclosed.
