Industry Week in Review – October 11, 2013

Airbus announced on October 7th that it received a $9.5 billion order from Japan Airlines for 31 of its wide-body A350 jets, allowing the European firm to significantly divert market share traditionally dominated by Boeing.  The agreement, which includes an option for 25 additional aircraft, is expected to replace Japan Airlines’ long-haul lineup of Boeing 777s.

Analysts agree the landmark deal has much deeper implications for Boeing’s relationship in a country that has previously invested billions of dollars in helping develop Boeing’s planes.  For decades, Boeing has benefited from strong relationships with Japanese parts suppliers and political ties to maintain more than an 80% market share in the Japanese market.  Problems and delays with its 787 Dreamliner ultimately tarnished Boeing’s reputation and created doubt on the American firm’s ability to deliver aircraft on time.

In the government services space this week, CACI International announced that it has agreed to acquire Six3 Systems from private equity firm GTCR for $820 million. CACI hopes the deal will aid it in its shift towards higher-margin solutions work and expand its capabilities in the areas of cyber and intelligence. The deal, which is expected to close during the quarter ending December 2013, implies a forward EBITDA multiple (net of tax benefits) of approximately 11.5x.

Big Movers

Chemring Group plc (Down 23.5%) – Shares were down this week after the Company released a note stating their operating profit would be 8 million pounds lower than previously expected, and issued guidance that 2014 would be lower still.

Relevant Transactions

CACI International to acquire GTCR’s Six3 Systems Inc., a provider of intelligence, defense, and civilian solutions for national security agencies and critical missions in the United States. The deal is worth an estimated $820 million.

LongueView Capital acquired Victory Capital’s Ascent Aviation Services, a provider of narrow body maintenance and storage services for aviation customers worldwide. Terms of the deal were not disclosed.

Technical and Project Engineering, LLC acquired Strong Point Research, a provider of modeling, simulation, and training services to government, military, and commercial organizations. Terms of the deal were not disclosed.

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