Industry Week in Review – September 5, 2014

Aerospace & Defense Update

General Dynamics secured a contract to deliver 589 of the company’s Scout Specialist Vehicles to the British Army beginning in 2017.  The $5.76 billion contract is the Ministry of Defense’s largest order for armored vehicles in roughly 30 years, illustrating the government’s commitment to modernize its military capabilities.  General Peter Wall, Chief of the British General Staff, commented on the significance of the contract saying, “the Scout Family is a transformational program that will refresh our armored capability and ensure the army remains a first-tier maneuver force.”  The Scout medium-weight armored vehicles will be used to replace an aging fleet of vehicles that has been in service for 40 years.  Currently, six versions of the vehicle have been designed and can perform roles including, but not limited to, reconnaissance and strike, joint fire control, ground-based surveillance, and repair and recovery.

On September 4th, Esterline Corporation announced that it is divesting three of its business units: Eclipse Electronic Systems, Pacific Aerospace & Electronics, and Wallop Defence Systems as well as a small distribution operation.  Curtis Reusser, Esterline’s CEO, said that although all three operations are good businesses, they would benefit from a closer strategic alignment with a different owner.  The divested businesses will be reported as discontinued operations beginning in 4Q14.

Government Technology Solutions Update

The One Acquisition Solution for Integrated Services (“OASIS”) indefinite quantity indefinite delivery (“IDIQ”) from the General Services Administration (“GSA”) is now open for agency business.  The notice, issued by the GSA on September 3rd, allows government agencies to begin purchasing professional services from companies that were awarded full and open awards back in May.  The OASIS Small Business notice to proceed was issued in late June.  Deltek estimates that the types of services OASIS provides cover a $60.0 billion market; the GSA could potentially capture 5-10% market share.  The Air Force is also expected to be a large customer with an estimated $1.4 billion in annual contract dollars flowing through OASIS.

Federal employees may receive a 1.0% pay raise in the near future due to President Obama’s recent proposal.  The raise is expected to take effect in January 2015, unless congress passes legislation blocking this proposal.  Years of pay freezes in the Federal Government have created a pay gap between Federal and private sector employees.  Without addressing this pay gap, the president of the National Treasury Employees Union, Colleen Kelley, feels Federal agencies will have a difficult time recruiting new workers to replace the 600,000 Federal employees that are eligible to retire by 2017.

Big Movers

TASER International, Inc. (Up 16.6%) – Shares were up this week after the Company announced that the New York Police Department will test the company’s body cameras.

Relevant Transactions

Information Innovators Inc. acquired Global Net Services, Inc., a provider of IT systems engineering, software development, and related services focused primarily on serving the Health IT solutions needs of the Food and Drug Administration.  Terms of the deal were not disclosed.

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