Aerospace & Defense Update
The annual Special Operations Forces Industry Conference (“SOFIC”) kicked off this past week in Tampa, FL bringing together military, government, and industry stakeholders alike. This year, defense giants such as Boeing, General Dynamics, and Polaris showed off a range of new ultralight vehicle offerings in response to the U.S. Army’s pre-solicitation for new ultralight combat vehicles (“ULCV”) that can take advantage of tactical lift. The U.S. Special Operations Command has also voiced a request for 68 lighter, more expeditionary vehicles that can fit inside a CV-22 Osprey. This spark in demand appears to stem from a growing capability gap in land transportation vehicles as the military focused on more heavily armored options during the past two wars.
Boeing, Lockheed Martin, and Textron have been rumored to be among the most interested potential buyers, according to various industry reports, for United Technologies Corp.’s Sikorsky helicopter unit. All three are considering structures to avoid potential negative tax consequences to United Technologies and its shareholders. The unit may also be spun-off as a stand-alone entity.
Government Technology Solutions Update
A House of Representatives panel approved the $51 million spending measure to provide the National Aeronautics and Space Administration (“NASA”) and Justice Department with modest budget increases. Under the bill, NASA would receive additional funding for space exploration and fighting cybercrime. The Justice Department measure would establish a $50 million fund with $15 million allocated toward body-worn police cameras; this proposed budget falls short of President Obama’s request. The White House has issued a letter in response deeming the budget to be insufficient for improving relations between communities and the police. The bill, one of the 12 annual spending measures passed through Congress, will be sent for a House floor vote next month; however, it is expected to be vetoed by President Obama, a continuation of his vow to veto bills until domestic programs receive greater funding.
The Technology Business Management (“TBM”) Council is bringing together Federal and private sector Chief Information Officers (“CIOs”) to improve reporting on Federal IT spending. Federal agencies collectively spend ~$80 billion a year on IT solutions and services, but tracking where the money is spent is often difficult. The TBM Council is creating a Commission on IT Cost, Opportunity, Strategy, and Transparency (“IT COST”) to focus on increased IT spending transparency / visibility and to develop a set of recommendations for the Federal Government. Furthermore, one of the main goals will be to develop a taxonomy system to standardize reporting across agencies and departments and increase accuracy of self-reporting.
Booz Allen Hamilton (Down 11.4%) – Shares were down this week following the Company’s recent earnings announcement for the period ending March 31, 2015. Revenue fell 4.3% to $1.34 billion for the quarter due to a reduction in billable hours and lower than expected margins.
Magellan Aerospace Corp. acquired Euravia Engineering & Supply Co. Ltd., a provider of maintenance, repair, and overhaul (“MRO”) solutions for a wide range of aircraft and helicopter gas turbine engines. The deal is worth an estimated $56.5 million.
Portfolio Company of Trive Capital, Valence Surface Technologies acquired Flextronics San Carlos, a provider of a full range of surface treatments for the semiconductor, aerospace, laser, microwave, and medical device industries. Terms of the deal were not disclosed.
Zentech Manufacturing, Inc. acquired Colonial Assembly & Design, LLC, a provider of circuit design and layout, systems level design, machining and sheet metal, and complex cable assembly / wire harness manufacturing. Terms of the deal were not disclosed.
JLL Partners received FTC approval to acquire Sun Capital Partners V, L.P.’s portfolio company, Point Blank Holding Corp., a manufacturer of high performance protective solutions, including bullet, fragmentation and stab resistant apparel and related accessories. Terms of the deal have not yet been released.
CYBERBIT LTD, a subsidiary of Elbit Systems, to acquire NICE Systems’ cyber and intelligence division, a provider of tools for generating intelligence from communications for law enforcement agencies and intelligence organizations. The deal is worth an estimated $157.9 million with $117.9 million paid at close and $40 million subject to the business’ future performance.
Computer Sciences Corporation officially announced a spin-off its U.S. public sector business, a provider of IT and professional services and solutions to Federal, state, and defense customers. The U.S. public sector generated $4.1 billion of revenue and $591 million of operating income in FY2015.