Industry Week in Review – June 29, 2012

Airbus announced that it could enter the U.S. market as early as Monday with plans to build its A320 jets in Mobile, Alabama. Similar to when Toyota entered the domestic auto industry during the 1980s, this move could transform the domestic aerospace industry.

In response, Boeing has issued statements against its rival Airbus claiming that any job creation in the U.S. will not offset the alleged damage caused by “illegal subsidies” at Airbus. Both industry giants are familiar with illegal subsidies accusations, with a recent European Union case against Boeing currently moving through appeals at the World Trade Organization (“WTO”) and a previous case from the WTO that ruled Airbus had received illegal subsidies.

Media reports indicate that the package of incentives for Airbus, including right-to-work laws, lower labor costs than Europe, and the recent package outlined for the protracted U.S. Air Force refueling tanker contract could amount to more than $100 million and the creation of more than 1,000 jobs. Airbus already spends $12 billion each year in the U.S. sourcing parts for its jets, but the aggressive move into Boeing’s home court could potentially split the political support Boeing’s company has experienced.

Big Movers

Macdonald Dettwiler & Associates Ltd. (Up 34.0%) Shares traded upward this week after the Company announced it will acquire Space Systems / Loral, Inc, the commercial satellite subsidiary of Loral Space & Communications, Inc. for $875 million.

Unisys Corporation (Up 24.8%) – Shares traded upward this week after the Company won a contract from the Department of Homeland Security to compete for task orders under the $3 billion Tactical Communications Equipment and Services contract vehicle.

Smith & Wesson Holding Corporation (Up 17.4%) Shares traded upward this week after the Company announced fourth quarter sales of $129.8 million, compared to estimates of $126.5 million. Additionally, the Company’s profit grew to $12.5 million, from $1.1 million in the same quarter last year.

Relevant Transactions

General Dynamics to acquire Earl Industries’ Ship Repair and Coatings Division, a ship repair company that supports the U.S. Navy fleet in Norfolk, VA and Mayport, FL. The acquisition allows General Dynamics to expand its National Steel and Shipbuilding Company (“NASSCO”) maintenance and repair operations to two key East Coast naval ports. The terms of the deal were not disclosed.

Cassidian / EADS to acquire Carl Zeiss’ Optronics, a defense optics unit of Carl Zeiss that develops, manufactures, and distributes a wide range of optical and optronic products and systems for the Army, Navy, and Air Force. The acquisition allows Cassidian, the defense unit of EADS, to expand its offerings with Optronics’ night vision binoculars, military laser pointers, and satellite optics. The terms of the deal were not disclosed.

Macdonald Dettwiler & Associates (“MDA”) to acquire Space Systems / Loral, a subsidiary of Loral Space & Communications Inc. responsible for the design, manufacturing, and integration of commercial and government satellite systems worldwide, for $875 million. The acquisition allows MDA to support the growing demand for high-powered satellites in the commercial market.

Deloitte to acquire IE Discovery, a provider of litigation support and electronic discovery management services to government agencies, corporate law departments, and outside counsels. The acquisition allows Deloitte to provide electronic data discovery services to the federal government and compete with other service providers’ existing federal e-discovery services. The terms of the deal were not disclosed.

BE Aerospace to acquire Interturbine, a leading provider of material management logistical services to global airlines and MRO providers. The acquisition will double BE Aerospace’s consumables product portfolio and will help to position the Company to offer a comprehensive range of products and services on a single-source basis to its customers. Interturbine will be acquired for a cash consideration of approximately €200 million ($249 million).

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