Industry Week in Review – October 23, 2015
Aerospace & Defense Update
President Barack Obama vetoed the National Defense Authorization Act, which authorized $612 billion in military spending over the next year. The Obama administration has criticized the bill for failing to resolve spending caps known as sequestration, and impeding on the President’s ability to close the U.S. detention facility in Guantanamo Bay, Cuba. Additionally, the administration is not satisfied that the bill provides increased funding to the Overseas Contingency Operations, which is not subject to budget caps. The House is scheduled to vote on November 5th to potentially override the veto.
United Technologies Corp, the maker of Pratt & Whitney jet engines, Otis elevators, and Carrier air-conditioning equipment, announced a $12 billion increase of its stock buyback plan. The Company aims to buy back $16 billion worth of stock through 2017 in order to take advantage of “a big disconnect” between the Company’s value and its share price. The accelerated buyback follows troubles in China, a static Europe, and the increasing cost of new engine production. The Company also faced issues with a new logistics center in New Hampshire, leading to a 55 unit decline in engine deliveries in the third quarter to 109, compared to the previous year. Chief Executive Greg Hayes says they have corrected the problems in the New Hampshire facility, and will have made up for the lost time on engine deliveries by the end of the year. Mr. Hayes said the Company will remain open to acquisitions up to “a couple billion dollars.’”
Government Technology Solutions Update
The General Services Administration (“GSA”) issued the long-awaited Request for Proposal (“RFP”) for its Network Services 2020 (“NS2020”) Enterprise Infrastructure Solutions contract earlier this week. The 15 year contract is part of GSA’s initiative to replace the Networx contract, and has a ceiling of $50 billion. Efforts to craft the RFP have been underway for over two years, with the GSA attempting to balance needs of the Federal government and telecommunication industry. NS2020 was originally scheduled to be released in July, but was pushed back due to an overwhelming response to the draft RFP. The contract will provide agencies with a list of preapproved venders for telecommunication services, such as cloud services, web hosting services, and call centers. Interested vendors will have until January 15, 2016 to submit proposals, with an award date expected towards the end of 2016.
The Office of Management and Budget (“OMB”) released its proposed overhaul of A-130, the rulebook for computer and information security within the Federal government, with a 30-day period for the public to comment. The revision, ordered by Congress, was prompted by the outdated state of the rulebook, which was last updated in November 2000. The proposed changes seek to centralize the policy updates of various agencies into a single cybersecurity and information governance manual. The new policy would include changes made under the Federal IT Acquisition Reform Act, as agencies would need to create IT Portfolios that include estimates for necessary spending on technology. In addition, the new A-130 would incorporate an increased emphasis on timely IT acquisitions, with awards needing to be granted within 180 days of solicitation and IT products delivered within 18 months. As part of this timely approach, agencies would be required to constantly revaluate ongoing IT projects and their current IT systems to make sure their systems are up-to-date. Further, as part of an increased focus on data, the new rulebook would mandate that public facing government data be in a usable, discoverable, and accessible format.
Big Movers
United Technologies (Up 8.2%) – Shares were up this week in response to an announcement of an increase in the Company’s stock buyback plan of $12 billion
Taser (Down 9.2%) – Shares were down this week after Motorola Solutions, Inc. announced its entry into the body camera segment with the Si500 and Si300 Video Speaker Microphones
Transactions
Whitcraft Group to acquire Berkshire Manufactured Products, Inc., a provider of precision engineered, critical jet engine components to the aerospace industry. The terms of the deal were not disclosed.
Triumph Group, Inc. acquired Fairchild Controls Corporation, a provider of proprietary thermal management systems, auxiliary power generation systems, and related aftermarket spares and repairs. The terms of the deal were not disclosed.
Imaginetics LLC to acquire Azmark Aero Systems LLC, a provider of precision machined parts, component sub-assemblies, line replaceable units, electro-mechanical sub-systems, and power systems. The terms of the deal were not disclosed
E-Sicherheits-Holdings GmbH acquired ESG Elektroniksystem-und Logistik-GmbH, a provider of electronic and IT systems for the military, public authorities, and companies in Germany. The terms of the deal were not disclosed.
Benchmark Electronics to acquire Secure Communication Systems, a provider of customized high-performance electronics, subsystems, and component solutions for military applications. The deal is worth an estimated $230 million.
Summit Partners acquired Aeryon Labs, a provider of advanced micro unmanned aerial vehicle systems. The deal is worth an estimated $46 million
Thales to acquire Vormetric, a developer of data protection technology for physical, virtual, and cloud infrastructures. The deal is worth an estimated $440 million.
Dell to acquire EMC Corp, a provider of data-storage hardware and data-center software. EMC shareholders will receive $24.05 a share in cash, with a tracking stock linked to a portion of EMC’s interest in VMware. The deal is worth an estimated $67 billion.
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