Industry Week in Review – June 07, 2019

KippsDeSanto & Co. Industry Week in Review – June 07, 2019

Industry Week in Review – June 7, 2019

Aerospace & Defense Update

This week, Amazon Web Services (“AWS”) announced its first two ground-based stations were operational. These stations, which will be used by both commercial and government customers, provide next-generation communication capabilities that will enable satellite operators to access data in near-real time.  These stations are equipped with enhanced data processing capabilities, encrypted communications for sensitive data, and the ability to access satellites worldwide.  These features enable operators to control a given satellite through the ground station, load data from the satellite into the station, and process that data through a cloud computing and storage interface. The stations, which were designed with government users in mind, have built in protections for sensitive data. These protections will allow government agencies to transmit encrypted data through the network and into the AWS Ground Station terminals. Amazon expects these systems to be vital in disaster relief scenarios, where up-to-date images and information are essential to providing immediate and efficient aid.  Over the next six months, Amazon anticipates launching ten more operational stations.

The grounding of more than 370 Boeing 737 MAX aircraft has significantly increased demand for aircraft rental services.  Full-service aircraft rental providers such as EuroAtlantic Airways and Avion Express have witnessed increased activity as airlines attempt to patch their disrupted flight schedules caused by the 737 Max’s suspension.  These companies, which provide all essential components of flying a plane including pilot, staff, fuel, and insurance coverage, generally charge by the hour, with the cost of a single-aisle plane ranging up to several thousand dollars per hour.  However, since the 737 Max’s grounding, monthly lease rates have increased more than 30% for short-term narrow-body aircraft rentals.  Despite Boeing’s announcement that the Company has fixed the flight-control system ostensibly responsible for the two 737 MAX fetal crashes, the Federal Aviation Administration and international regulating authorities have yet to signal when they will clear the 737 MAX for flight.

Big Mover(s)

General Dynamics Corporation (Up 8.2%) – Share prices increased as it was announced that General Dynamic’s business unit, Land Systems, secured a $25.6 million contract to produce the MK 46 MOD 2 Gun Weapon System (“GWS”) for Littoral Combat Ship (“LCS”) and Landing Platform Dock (“LPD”). This comes after General Dynamic’s shares were down 10% in May.

SAIC (Up 12.1%) – Share prices rose as SAIC announced revenues increased 37% 1Q19, fueled through several notable contract awards such as the $292M follow-on Safety and Mission Assurance Engineering Contract with NASA and a $535M contract to provide information technology support for the Defense Threat Reduction Agency (“DTRA”).

Transactions

Wynnchurch Capital, Ltd. has agreed to acquire two Industrial Forging Business Units from Allegheny Technologies, Inc., a provider of carbon steel forged products used in aerospace and industrial end-markets.  The deal is worth an estimated $37.0 million.

BAE Systems, Inc. acquired Riptide Autonomous Solutions, LLC, a provider of innovative, affordable unmanned underwater vehicle (“UUV”) technology and solutions.  Terms of the transaction were not disclosed.

 Consolidated Precision Products Corp. has agreed to acquire the Cast Products business of Allegheny Technologies, Inc., a provider of titanium investment castings that are primarily used by aerospace & defense OEMs in the production of commercial jet airframes and engines.  Terms of the transaction were not disclosed.

Angeles Equity Partners, LLC acquired APCT, Inc. a provider of reliable, quick-turn printed circuit board (“PCB”) prototypes with global production management capabilities.  Terms of the transaction were not disclosed.

Patria Oyj acquired Belgium Engine Center SPRL, a provider of military jet engine maintenance, repair, and overhaul mainly servicing the Pratt & Whitney F100 engine which powers F-15 and F-16 aircraft. Terms of the transaction were not disclosed.

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