Industry Week in Review – July 20, 2012

The Aerospace Industries Association released a report this week estimating that more than 2 million American jobs could be lost next year if sequestration is allowed to proceed as planned.  Of the 2 million jobs, nearly 270,000 federal jobs are expected to be lost, but only 48,000 federal jobs are expected to be lost at defense agencies.  An additional 340,000 government contracting and private sector job losses could be tied to the impending budget cuts.  More information about the effects of sequestration will likely become available now that the House passed the Sequestration Transparency Act.  The bipartisan bill was approved by a wide margin and requires The White House to produce a report outlining how the $1.2 trillion in cuts will be distributed across the federal government.

Amid continued violence in Syria, U.S. Defense Secretary Leon Panetta stated at a press conference this week that the situation was, “rapidly spinning out of control.”  Panetta was joined by British defense chief Phillip Hammond.  Both agreed that the conflict in Syria must end with a peaceful transition and Assad stepping down from power.  Panetta noted that the United States and its allies were working to safeguard stockpiles of chemical weapons in Syria to prevent further conflict escalation.  In addition, both the United States and members of the U.N. Security Council are working together to craft a resolution that would impose sanctions on the Syrian regime.

Big Movers

Heroux-Devtek Inc. (Up 16.3%) – Shares traded upward this week after the Company announced it was selling its Aerostructure and Industrial Products Operations to Precision Castparts Corp.

Textron (Up 13.7%) – Shares traded upward this week after the Company reported second quarter profit of 58 cents a share, beating estimates of 44 cents a share.  Increased profits were driven by strong performance in Textron’s Bell helicopter and Cessna units.

Relevant Transactions

FutureNet Group, Inc acquired the assets of Smith & Wesson Security Solutions, a subsidiary of Smith & Wesson Holding Company.  Smith & Wesson is selling the assets of the subsidiary to concentrate more resources on its core firearms business.  Smith & Wesson will continue to operate the subsidiary as it explores strategic alternatives for a complete divestiture.  Wedbush Securities advised Smith & Wesson on the asset sale.  Terms of the deal were not disclosed.

Precision Castparts Corp. acquired Aerostructure and Industrial Products Operations from Heroux-Devtek Inc., an aerospace and industrial manufacturer in Canada.  Precision Castparts purchased the business units for CAD 300 million (~$296 million), approximately 2.3x revenue. The final purchase price is subject to post-closing adjustments.

L-3 Communications completed its spin off Engility Corporation, a provider of program management and systems acquisition support services for defense and civilian agencies.  One share of Engility will be distributed for every six shares of L-3 common stock.  Bank of America served as the financial advisor to L-3 Communications.

Environmental Systems Research Institute has acquired GeoIQ, a provider of software solutions for managing and analyzing data.  GeoIQ will be relocated from Arlington, VA to Washington, DC to join ESRI’s staff at a new software development center.

SAIC has agreed to acquire maxIT Healthcare, a provider of clinical IT implementation services to healthcare providers.  The total consideration is $493 million, with $473 million in cash up front and $20 million in an earn-out.  SAIC is expected to add approximately 1,300 maxIT employees to its Health Solutions Business Unit.

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