Industry Week in Review – October 9, 2015
Aerospace & Defense Update
The U.S. Senate approved the 2016 defense policy bill on Wednesday, just six days after it was passed by the House of Representatives. The bill will now be presented to President Obama, who is expected to veto it due to its loophole that provides additional funding to defense via the Overseas Contingency Operations (“OCO”) account. The bill increases the OCO account by nearly $38 billion, creating authorization to spend money on a variety of programs; however, it bypasses the spending caps implemented by the Budget Control Act, a key concern to those who oppose the bill. President Obama has ten days to veto the bill, after which it will go back to Congress for a potential override. Despite already passing the Senate with over a two-thirds majority, Minority Leader Harry Reid said that Democrats will sustain President Obama’s veto. Both sides have until December 11th to reach a long term budget deal or pass another short term extension to avoid a government shutdown.
Global Jet Capital has agreed to purchase General Electric’s corporate jet unit for $2.5 billion, as it expects more companies and wealthy individuals to rent instead of buy plush planes. Having launched last year, Global Jet Capital provides leasing and lending solutions for large-cabin and long-range private jets. Since its launch, it has closed several international transactions; however, this deal increases its exposure to the U.S. market, as it will have access to General Electric’s portfolio of 300 aircraft. The pending deal, one of the largest ever involving corporate aircraft, demonstrates Global Jet Capital’s confidence in the long-term growth prospects of the large-cabin and long-range private jet market.
Government Technology Solutions Update
The General Services Administration’s (“GSA”) agile-focused contract vehicle, 18F, launched its first vertical, “Digital Economy Practice,” this week. The new vertical seeks to combine technical agile expertise with functional business knowledge to both afford the greater flexibility associated with agile methods while better addressing agency challenges. The new approach will allow 18F to not only focus on individual, pre-identified Information Technology (“IT”) projects, but also on helping agencies shape near-term digital strategies across their infrastructure. The vertical comes as agencies are searching for increased flexibility in IT acquisitions in order to better meet constituent needs while spending less in the midst of uncertain budget environments. As currently structured, the new vertical focuses on financial projects, with 18F citing the myRA retirement tool at the Treasury Department and the Tick Size Pilot initiative at the Securities and Exchange Commission (“SEC”) as possible projects suited for the vertical’s proficiencies.
Efforts to give U.S. Cyber Command (“CYBERCOM”) more purchasing power are gaining momentum as the Department of Defense (“DoD”) seeks to develop, enhance, and protect its technological infrastructure. In line with the DoD’s emphasis on strategic flexibility, the new initiative looks to give CYBERCOM special procurement authority outside of the DoD’s conventional weapons procurement process to facilitate faster IT acquisitions. Officials cited the unique nature of cyber procurements, which are cheaper and shorter in duration than typical weapons systems in order to keep pace with quickly evolving needs and challenges, as justification for the special authority. The initiative comes in the midst of a large CYBERCOM expansion, evidenced by the Command’s five-year $460 million contract announced in September, and its current effort to recruit over 6,000 cyber specialists in order to support operations worldwide.
Big Movers
Magellan Aerospace (Up 9.4%) – Shares were up this week in response to being awarded a follow on contract to provide nose and main landing gear components and kitted assemblies to Messier-Bugatti-Dowty for major commercial aircraft customers.
Com Dev International Ltd. (Up 20.2%) – Shares were up this week after it announced that it is in talks with potential acquirers.
Transactions
Achilles Technology Solutions to acquire Materials and Electrochemical Research Corporation, a provider of fuel cells, batteries, coatings, composites, fullerenes / nanotubes, metal alloys, and gas storage systems. The terms of the deal were not disclosed.
Kaman Aerospace Group to acquire Timken Alcor Aerospace Technologies, Inc., a producer and supplier of direct replacement parts for gas turbine engines and components in the aviation industry. The terms of the deal were not disclosed.
Global Jet Capital to acquire Corporate Aircraft Financing Portfolio of GE Capital Corporation, a provider of loans and leases as well as more than 300 fixed-wing aircraft. The deal is worth an estimated $2.5 billion.
Raytheon Company acquired Foreground Security, an operator of the Virtual Security Operations Center (“V-SOC”) and Automated Threat Intelligence Platform (“ATIP”), and a provider of advanced cyber monitoring, threat hunting, and professional services capabilities. Terms of the deal were not disclosed.
