Industry Week in Review – July 1, 2016
Aerospace & Defense Update
After months of discussion, Airbus and Safran have reached an agreement to create Airbus Safran Launchers, a European rocket joint venture. The two companies have been working together since 2014 to build the Ariane 5 space launcher and are establishing the new joint venture in order to develop the next generation rocket, the Ariane 6, which is expected to complete its first flight in 2020. The Ariane 6 aims to lower costs and gain market share, particularly in light of the increasing competition from SpaceX. To further solidify its market reach, Airbus Safran Launchers is in talks to acquire Arianespace, a European rocket-launch company. However, the potential deal may lead to issues with the European Commission over anti-trust regulations.
The British vote to leave the EU as a result of the referendum (“Brexit”) was not the outcome desired by the British aerospace and defense market, which employs roughly 300,000 individuals. Large British industry leaders, such as Airbus and Rolls Royce, had lobbied to remain in the EU and are now hoping for a deal that grants both maximum access to the European single market and has minimum restrictions on the mobility of labor from the region. To address the short term, Rolls Royce released a statement after the referendum result, stating that there will be no immediate impact on day-to-day operations. However, the CEO of ADS Group, a UK trade organization representing the aerospace, defense, security, and space sectors, said that the Brexit vote could lead to a future decline in incremental competitiveness for the aerospace and defense sector. Despite the Brexit, recent financial data released by ADS displays strong industry growth and good financial health for the aerospace and defense market.
Government Technology Solutions Update
The Space and Naval Warfare (“SPAWAR”) Systems Center Atlantic recently made awards on a $750 million Commercial-Off-the-Shelf (“COTS”) Command and Control (“C2”) contract to a group of 21 companies, 17 of which are small businesses. Under the contract, companies will provide COTS C2 equipment and support services primarily to the Navy, as well as other defense and civilian agencies. The C2 equipment stipulated in the contract will include video, imagery, and telecom systems, global positioning system equipment, intelligence support systems, as well as tactical displays processors, and workstations. The contract has an expected period of performance that runs through June 2021.
Both Donald Trump and Hillary Clinton’s proposed plans for the Department of Veterans Affairs (“VA”) would increase spending by at least tens of billions of dollars over 10 years. According to the Committee for a Responsible Federal Budget, a nonpartisan group advocating for fiscal responsibility, Trump’s plan, which would provide all veterans with immediate healthcare from any doctor who accepts Medicare, comes with a much steeper price. However, Trump contends that giving veterans the option to choose their own healthcare provider will “stop the wait time backlogs and force the VA to improve and compete.” Clinton’s proposal includes ending the disability compensation backlog, recreating the department’s employee performance evaluation system, and creating a permanent tax credit to boost veteran hiring.
Big Movers
KEYW (Up 12.4%) – Shares were up this week after the company announced that it has closed the previously announced sale of the HawkEye G Product Line Business of Hexis Cyber Solutions to WatchGuard Technologies, Inc.
Safran (Up 5.0%) – Shares were up this week after the company announced that it has concluded months of talks with Airbus to establish a European rocket joint venture and build Europe’s next major rocket, the Ariane 6.
Transactions
FLIR Systems, Inc. acquired Armasight, Inc., a provider of thermal imaging, visible-light imaging systems, locater systems, measurement and diagnostic systems, and threat-detection solutions. The deal is worth an estimate $41 million.
