Industry Week in Review – June 1, 2018

Aerospace & Defense Update

On Friday, the Trump administration announced the enactment of tariffs on steel and aluminum imports from Europe, Mexico, and Canada.  Though the American defense industry buys the majority of its steel and aluminum from domestic suppliers, the tariffs are expected to allow those suppliers to raise prices unhindered by foreign competition.  Because of retaliatory tariffs, defense firms may face weaker demand from abroad and rising prices at home.  For products with no European competition, such as heavy-lift helicopters or C-130J cargo aircraft, European customers will still purchase from U.S. suppliers.   Alternatively, other reports speculate that the interdependence of NATO allies will prevail against a trade war since many European countries rely on U.S. suppliers.

The U.S. military has held early talks about implementing a Terminal High Altitude Area Defense (“THAAD”) system in Germany to boost European missile defenses.  European allies and the U.S. are weary of potential adversaries developing ballistic missiles capable of reaching southern Europe.  In particular, the German defense ministry has been looking to bolster its short and medium-range missile defenses.  The U.S. withdrawal from the Iran nuclear accord has accelerated the efforts to install the THAAD system in Europe.  In early June, the Pentagon is expected to further acknowledge the issue in a new missile defense review.  Additionally, Germany plans to review its territorial defense needs later this year, specifically looking at the THAAD system and the Arrow 3 anti-missile system.

Government Technology Solutions

The White House is against the idea of shuttering the Defense Information Systems Agency (“DISA”), as was proposed in the House version of the fiscal 2019 National Defense Authorization Act (“NDAA”).  The proposal would shift Pentagon IT acquisition services from DISA to other Department of Defense (“DoD”) components and eliminate the agency by 2021 in an effort to promote efficiency, reduce redundancy, and streamline bureaucracy across the DoD’s 28 4th Estate support agencies.  The White House responded by pledging its support for keeping DISA as the DoD’s centralized IT acquisition arm.  The Executive Office of the President stated in a memo that closing and transferring DISA’s responsibilities elsewhere would increase the cost of acquiring IT, weaken the DoD’s ability to secure its cyber networks, and inhibit DISA’s mission to provide seamless communication to warfighters and senior leaders.  Under the House proposal, all DISA functions and personnel not transferred elsewhere by 2021 would be eliminated.

As the U.S. and North Korea engage in peace talks, North Korean hackers have continued, or even ramped up, cyberattacks across Asia, Europe, and the U.S., focusing on financial and digital theft.  The Department of Homeland Security (“DHS”) and Federal Bureau of Investigation (“FBI”) released a joint alert Tuesday regarding the spread of a particular malware variant linked to North Korea.  The alert served as a reminder that North Korea remains highly dependent on cybercrime for both financial and geopolitical gain.  For example, in South Korea, hackers have targeted select victims, using phishing lures to glean information relevant to the current peace process.  As peace talks move forward, experts are unsure whether North Korea will reduce its hacking activities due to their decentralized nature.  North Korean and U.S. officials met Wednesday to organize the potential summit between Kim Jong-un and President Donald Trump, although cybersecurity was not discussed.

Big Movers

Bombardier (up 10.8%) – Share prices were up this week after the company announced its plans to build two new private planes in response to growing demand for large-cabin business jets

Booz Allen Hamilton (up 7.3%) – Share prices were up this week after the company reported strong fiscal fourth quarter and fiscal 2018 results.


BBA Aviation has agreed to acquire EPIC Aviation, LLC, a provider of fuels and services to FBOs, commercial airlines, airports, ground fueling operators, the U.S. Defense Logistics Agency (DLA) and other government agencies.  Terms of the deal were not disclosed.

Cache Creek Industries, LLC has acquired Mountain Secure Systems, a provider of proprietary, ruggedized and highly engineered electronic solutions to defense contractors.  Terms of the deal were not disclosed.

Madison Dearborn Partners and CoVant Management have jointly acquired LinQuest Corp., a provider of space systems technology solutions to the U.S. defense and intelligence communities.  Terms of the deal were not disclosed.

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