Industry Week in Review – October 30, 2015
Aerospace & Defense Update
Northrop Grumman was awarded the Air Force’s Long Range Strike Bomber (“LRS-B”) contract, the largest military aircraft contract since the Joint Strike Fighter (“JSF”) award to Lockheed Martin in 2001. Northrop beat out the team of Boeing and Lockheed Martin to build a new fleet of aircraft to replace the Air Force’s B-52’s and B-1s. The contract, which is expected to exceed $55 billion over the life of the program, is divided into a cost-plus contract and a fixed-price agreement, which will cover the first five low-rate initial production lots. The first five lots will cover the production of 21 aircraft. According to the House Armed services Committee Chairman Rep. William “Mac” Thornberry, Boeing and Lockheed will likely submit a bid protest, which could possibly delay the start of the program.
The Senate approved a bipartisan budget agreement that approves spending for domestic and defense programs, while raising the debt ceiling to fund the government into 2017. The budget deal would lift sequester spending caps and increase discretionary spending by ~$80 billion, which is split evenly among defense and civilian programs over the next two years. This implies that there would be no fiscal standoffs and threats of government shutdown for more than a year. The agreement was negotiated by former Speaker John Boehner, alongside the White House and three other congressional leaders. The measure now moves to the White House, where President Obama has said he will sign it.
Government Technology Solutions Update
Department of Defense (“DoD”) Chief Information Officer (“CIO”), Terry Halvorsen, announced this week that the Department is planning to ramp-up DoD and private sector cyber exchanges in the coming months. As part of the initiative, private sector employees from up to 10 firms will be placed within Halvorsen’s CIO staff or military services’ CIO offices. The exchange program is rooted in the notion that bringing commercial cyber security expertise into the Pentagon is essential to keeping pace with cyber threats and defense. The goal of the program is threefold: (i) to improve the DoD’s understanding of economic drivers within the cyber security industry; (ii) to better cooperation between the DoD and private businesses; and (iii) to access and improve state-of-the-art cyber security technology. Modular data center technology for data center consolidation, and software-defined networking have been identified as particular areas of interest.
In response to calls from the Obama administration to improve IT procurement, the Office of Federal Procurement Policy (“OFPP”) has launched the Digital Service Contracting Professional Training and Development Program. The program has brought together acquisition professionals from across the Federal government to better the procurement of agile technologies and programs. As a result of traditional acquisition vehicles and procedures, Federal agencies have found it increasingly difficult to keep pace with technological innovation. The program seeks to educate professionals on how to work within Federal acquisition procedures to procure the necessary IT technologies and programs in a quick and efficient manner. OFPP expects this program to have a wide ranging impact, as the professionals within the program return to their home agencies as experts in IT and agile procurement, allowing for more agile procurement within these agencies going forward.
Big Movers
B / E Aerospace (Up 8.1%) – Shares were up this week in response to a $260 million award from a major international airline to outfit its new aircraft with first class suites
Northrop Grumman (Up 4.4%) – Shares were up this week in response to the LRS-B contract award
Transactions
The Blackstone Group to acquire MB Aerospace Holdings, an engine component manufacturer and repair business in the aerospace and defense markets in North America and Europe. The terms of the deal were not disclosed.
Nautic Partners acquired Aerostar Aerospace Manufacturing, Inc., a provider of machined components and assemblies to aerospace, defense, medical, and commercial customers. The terms of the deal were not disclosed.
CTS Corp. acquired Filter Sensing Technologies, a provider of radio frequency measurement and control sensors for passenger car, commercial vehicle, off-road, and other transportation applications. The terms of the deal were not disclosed.
Tempus Applied Solutions acquired Proflight Aviation Services, an operator of a Federal Aviation Administration approved flight school. The terms of the deal were not disclosed.
