Industry Week in Review – July 26, 2019

KippsDeSanto & Co. Industry Week in Review – July 26, 2019

Industry Week in Review – July 26, 2019

Aerospace & Defense Update

Congressional leaders have agreed to a two-year debt and budget deal, ensuring spending stability and avoiding a potential partial government shutdown.  The deal includes $1.37 trillion in agency spending for GFY2020, with a slight increase for GFY2021.  Defense spending is expected to increase to $738 billion next year, and the deal includes flexibility in transferring money between accounts.  The amount represents a compromise between congressional Republicans and Democrats while ensuring the federal government will avoid its first-ever default on U.S. payments.  The deal was chiefly negotiated by the Speaker of the House, Nancy Pelosi, and the Treasury Secretary, Steven Mnuchin.  In addition to avoiding a federal default, the agreement will help prevent automatic spending cuts from hitting the Pentagon.

The Senate voted 90-8 to confirm Mark Esper as Secretary of Defense, completing a lengthy process to fill the top position in the Pentagon.  The office has been filled on an interim basis since former chief, Jim Mattis, resigned in December, and Esper’s confirmation ends the longest period in Pentagon history that there has not been a congressionally approved leader.  Esper takes charge at a time of heightened tensions with Iran, while many top civilian posts still remain vacant.  The position of Secretary of Defense had been filled by three acting secretaries since Mattis’ resignation, including Esper.  Esper is a military veteran and a graduate of West Point, and has made his career as a lobbyist for defense company Raytheon as well has holding various policy advisor roles on Capitol Hill.

Big Mover(s)

The Boeing Company (Down 8.6%)– Share prices fell as Boeing reported its worst ever quarterly loss in the wake of their announced $4.9 billion charge related to the 737 MAX groundings. Additionally, the Company announced they would not submit a bid on the upcoming Ground-Based Strategic Deterrent missile program from the Pentagon.

Northrop Grumman Corporation (Up 9.4%) – Share prices increased as quarterly earnings beat expectations by 9%. The Company is also expected to win the Ground-Based Strategic Deterrent contract to replace the Minuteman 3 intercontinental ballistic missile after Boeing announced they would not submit a bid.

Transactions

Advent International has agreed to acquire Cobham plc, a provider of radar and other electronic products for the defense and aviation industries. The deal is valued at an estimated $5.4 billion.

ClearSky has acquired Altamira Technologies Corporation, a provider of engineering and analytic services to the U.S. federal defense, intelligence, and homeland security communities.  KippsDeSanto & Co. served as the exclusive financial advisor to Altamira.  Terms of the transaction were not disclosed. 

Eaton Corporation plc has agreed to acquire Souriau-Sunbank Connection Technologies, a provider of highly-engineered solutions for harsh environments serving customers primarily in aerospace, defense, and space end markets. The deal is valued at an estimated $920 million.

Honeywell International, Inc. has acquired TruTrak Flight Systems, Inc., a provider of autopilots for experimental, light-sport and certified aircraft. Terms of the transaction were not disclosed.

 Octo Consulting Group, Inc., a portfolio company of Arlington Capital Partners, has acquired Connexta, LLC, a provider of Open Source Software (“OSS”) solutions for global Intelligence, Surveillance, and Reconnaissance (“ISR”) data interoperability needs across the U.S. federal defense and intelligence communities.  KippsDeSanto & Co. served as the exclusive financial advisor to Connexta.  Terms of the transaction were not disclosed.

Parsons Corporation has acquired QRC, LLC, a portfolio company of DC Capital Partners and a provider of survey tools for cellular communication systems, phone based measurement systems, stimulation tools, forensic tools, and integrated RF recording and playback equipment.  The deal is worth an estimated $215 million, including a $30 million transaction-related tax benefit.

PPG Industries, Inc. has agreed to acquire Dexmet Corp., a portfolio company of Sverica Capital Management. Dexmet is a provider of specialty materials for surfaces in aerospace, automotive, and industrial applications. Terms of the transaction were not disclosed.

Systems Planning and Analysis, Inc., a portfolio company of CM Equity, has acquired Veracity Forecasting and Analysis, Inc., a provider of decision support services to the government and defense sector. Terms of the transaction were not disclosed.

Vigor Industrial LLC, a portfolio company of The Carlyle Group, has agreed to acquire and merge with MHI Holdings, LLC, a portfolio company of Stellex Capital Management. MHI Holdings is a provider of ship repair of maintenance services. Terms of the transaction were not disclosed.

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