Industry Week in Review – March 24, 2017
Aerospace & Defense Update
After recent intelligence that the Islamic State is developing a bomb to hide in portable electronics, the U.S. and Britain banned the carrying of electronics larger than a cell phone aboard flights directly from certain Muslim-majority countries in the Middle East and Africa. Anonymous U.S. officials stated that the explosives of concern are designed to be concealed in laptop batteries. The Trump administration has said the ban is not an indication that there is information on a credible, specific attack. However, House Representative Peter King, a member of the House Intelligence and Homeland Security Committees, has indicated the intelligence reports are recent and there are reports of an event that is “possibly planned.” Impacted countries include, but are not limited to, the United Arab Emirates, Jordan, Egypt, Morocco, Turkey, and Saudi Arabia and it is estimated that ~50 flights into the U.S. will be impacted each day.
As part of its three-year review cycle of top positions in state-owned companies, the Italian government named Alessandro Profumo, a career banker, to be the new Chief Executive Officer of Leonardo, replacing Mauro Moretti. In January 2017, Moretti was convicted and sentenced to seven years in prison for his role in a train crash from 2009 where 32 people died, excluding him from another term as CEO. Profumo was previously the CEO of UniCredit and chairman of Italian bank Monte dei Paschi di Siena and has strong center-left ties within the Italian government. Though he has no aerospace and defense experience, he brings a considerable amount of international market experience, which the Italian government believes will be extremely valuable in expanding revenue channels.
Government Technology Solutions Update
The Department of Homeland Security’s (“DHS”) Flexible Agile Support for the Homeland (“FLASH”) contract was recently hit with a second round of protests last week. FLASH is a $1.4 billion, small business set-aside indefinite delivery / indefinite quantity (“IDIQ”) contract issued by DHS to procure Agile development solutions for the rapid deployment of several key IT capabilities. FLASH was initially awarded to 13 small businesses in November 2016, a decision which was quickly protested. Following corrective action in early March, DHS pulled back those original awards and issued new awards to 11 companies, dropping two of the original awardees. This triggered the recent protests, with four coming last week and three more this week, for which the government has until late June to make protest decisions.
The General Services Administration (“GSA”) recently proposed a new special item number (“SIN”) under IT Schedule 70 which would cover the acquisition of Continuous Diagnostics and Mitigation (“CDM”) solutions. GSA issued a Request for Information (“RFI”) on Wednesday, looking to get feedback from the industry to better understand how it improve efficiencies and increase the quality of CDM offerings available on Schedule 70. Currently, CDM solutions have been offered through a blanket purchase agreement (“BPA”), which is set to expire in August 2018. By adding a CDM-specific SIN to Schedule 70, GSA hopes to have the requisite approvals in place for agencies to access and procure the latest, and most effective set of tools and technologies. GSA wants to ensure that the current list of products and services offered through the BPA is not lost, and the SIN gives adequate flexibility to allow for the qualification of new CDM products as they become available. Responses to the RFI are due by early April, with awards under the SIN expected to be made sometime in May.
Big Movers
Bombardier (down 4.3%) – Share prices were down this week after information surfaced about a controversial intermediary named Multiserv Overseas and its possible involvement with Bombardier in a new project in Mongolia.
Transdigm (down 12.5%) – Share prices were down this week after U.S. Representative Ro Khanna of California requested a probe into the Company’s sales practices.
Transactions
Aircraft Recycling International has acquired Universal Asset Management, Inc., a provider of asset management and aircraft solutions for ageing aircraft. Terms of the deal were not disclosed.
Sussex Wire, Inc. has acquired Marox Corp., a provider of CNC precision machined orthopedic implants and aerospace components utilizing CNC multi-axis machining and additive manufacturing technologies. Terms of the deal were not disclosed.
Valence Surface Technologies has acquired Magnetic & Penetrant Services Company, a provider of metal finishing services to the Aerospace and Defense industries as a mission-critical supplier in the aerostructure supply chain. Terms of the deal were not disclosed.
