Industry Week in Review – May 17, 2019

KippsDeSanto & Co. Industry Week in Review – May 17, 2019

Industry Week in Review – May 17, 2019

Aerospace & Defense Update

This past week, the U.S. State Department cleared more than a billion dollars in potential weapon sales for three of America’s military allies.  The amount tops more than $1.01 billion in potential sales.  Raytheon is the primary contractor on all three of the potential sales.  Canada has been cleared to purchase $387 million worth of MK 54 lightweight torpedo conversion kits, South Korea $314 million in SM-2 Block IIIB missiles, and Japan $313 million worth of AIM-120C-7 Advanced Medium-Range Air-to-Air Missiles.  Primary work will be done at Raytheon’s Tucson, Arizona and Portsmouth, Rhode Island facilities.  The U.S. State Department has noted that these sales will support the foreign policy and national security objectives of the United States by meeting the legitimate security and defense needs of its closest allies.

Private equity investor, Onex, is close to gaining control of Canadian airline, WestJet, after the carrier’s board recommended accepting a takeover offer.  In addition, Air Canada has recently announced plans to take over Transat, the parent company of leisure carrier Air Transat.  The acquisition presents a unique opportunity in the leisure travel market.  Air Canada is not only buying the airline but also Transat’s other branches in the tourism sector. It had been rumored that Onex and WestJet also had been looking at acquiring Transat, which would have created a more formidable competitor for Air Canada.  Onex’s purchase of WestJet is the biggest private equity deal ever in the airline industry and the 16th biggest overall airline acquisition. It comes amid open speculation that investor Warren Buffett could also be in the market to buy an airline, notably Southwest Airlines.

Big Mover(s)

Embraer (Down 9.6%) – Share prices were down this week following release of the aircraft manufacturer’s latest quarterly report that included weak deliveries of just 11 commercial jets and 11 executive aircraft.

Kratos Defense & Security Solutions (Up 4.9%) – Share prices were up this week following news of quarterly earnings of $0.08 per share, beating the estimates of $0.02 per share. This compares to earnings of $0.05 per share a year ago.

Transactions

Acorn Growth Companies has acquired DIMO Corp, a provider of value-added distribution of operationally critical parts and higher-level assemblies for power, electromechanical, life support and mission-specific aircraft systems.  Terms of the transaction were not disclosed.

Aeromax Industries has acquired Dar-Ken, a provider of elastomer products for helicopters, whose product line includes custom seals, sleeves, ducts, and gaskets.  Terms of the transaction were not disclosed.

BlackBern Partners, LLC has acquired Zentech Manufacturing, Inc., a provider of highly complex electronic and RF circuit cards and assemblies.  Terms of the transaction were not disclosed.

By Light Professional IT Services, Inc. has acquired Metova Federal, LLC, a provider of cyber range and cyber training services to customers across the DoD, Federal Civilian, State and Local, and Commercial markets.  Terms of the transaction were not disclosed.

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