Industry Week in Review – March 15, 2019
KippsDeSanto & Co. Industry Week in Review – March 15, 2019
Industry Week in Review – March 15, 2019
Aerospace & Defense Update
This week, President Trump submitted his GFY2020 defense budget proposal to Congress. The total $750 billion proposal represents a ~5%, or $34 billion, increase from 2019 defense spending levels. Of the $750 billion requested, $164 billion will be placed in the overseas contingency operations (“OCO”) to circumvent budget caps. The budget proposal prioritizes investments in high-end capabilities and includes a $104 billion allocation for research, development, test, and evaluation (“RDT&E”). The Air Force, Army, and Navy are expected to receive $11.8 billion, $12.5 billion, and $9.95 billion respective increases in funding from GFY2019 levels. Over the next five years, the Pentagon anticipates top level defense budgets between $700 billion and $750 billion.
Following two fatal crashes of Boeing 737 MAX planes within the last five months, the Federal aviation Administration (“FAA”) temporarily grounded the aircraft, preventing airlines from using the model in U.S. airspace. Dozens of other countries, including the United Kingdom, Australian, and Canada have also grounded the aircraft. The decision came days after an Ethiopian Airlines jet crashed minutes into the flight. Boeing’s stock dropped 10.3% following the news of the crash and the subsequent grounding. Boeing maintains confidence in the MAX aircraft but recommended a temporary hiatus to ensure the plane’s safety.
Government Technology Solutions
This week, Canadian-based BlackBerry announced the launch of a Washington, D.C.-located subsidiary to support further expansion into the federal marketplace. This push into the federal landscape is partly in response to the increasing reliance by federal agencies on cloud computing and other NextGen IT capabilities. BlackBerry hopes that an expanded presence in D.C. will facilitate its adoption of necessary federal cloud certifications and compliance with U.S. national security requirements and augment its presence among federal agencies. Blackberry CEO, John Chen, said that he believes that the Company can “help the U.S. government securely build and connect all things from ATVs and drones to documents, emails, and the data that flows between them.” As a result, he wants the Company to invest in the federal market, where a “tidal wave of connected devices is in sight.” Also this week, FLIR Systems announced its plan to open a new headquarters near the nation’s capital. FLIR Systems aims to accelerate growth by increasing its presence in Washington, D.C. The new office will be home to CEO, Jim Cannon, and many other key company executives. Cannon said the move “…is critical to helping us grow our business, as it creates better proximity for FLIR to support key customers, investors, regulators and the more than 4,000 FLIR team members around the world.” These two announcements come on the heels of Parsons’ recent announcement to relocate its headquarters to the D.C. area and Amazon announcing a second headquarters in the area. These critical and strategic moves by IT heavyweights highlight the growing attraction to the nation’s capital as the federal government continues to increase funding for IT modernization initiatives.
Big Movers
Boeing (Down 10.3%) – Share prices were down this week following a fatal crash of Boeing’s 737 MAX 8 aircraft. The is the second fatal crash involving this model in the last 5 months, causing passengers and investors to question to jetliner’s safety.
Transactions
Comcast Corp. has acquired a portfolio company of LLR Partners, BluVector, a provider of cyber-threat detection solutions that protect federal and commercial companies against evolving security threats with the use of artificial intelligence and machine learning. Terms of the deal were not disclosed.
DFW Capital has bought a majority stake in Sev1Tech, a provider of high-end information technology services, primarily for the federal government. Terms of the deal were not disclosed.
Cubic Corporation has acquired Nuvotronics, Inc., a provider of microfabricated radio frequency products. The deal is worth an estimated $64 million.
Greenbriar Equity Group and First Aviation Services have agreed to acquire Dart Aerospace, a provider of mission equipment and aftermarket components for the helicopter and fixed-wing industries. Terms of the deal were not disclosed.
STS Aviation, a portfolio company of Greenbriar Equity, has acquired Triumph Group, Inc.’s Aviation Services – NAAS Division, a provider of maintenance support to airlines, MROs, government operators and OEMs, specializing in in fuel systems maintenance, leak detection and bladder cell repair. Terms of the deal were not disclosed.
