Industry Week in Review – March 30, 2018
Aerospace & Defense Update
On Thursday, shareholders of GKN plc, a British manufacturer of aerospace and auto parts, narrowly voted to accept an acquisition offer from turnaround specialist, Melrose Industries plc. Melrose had previously submitted a hostile takeover bid of ~$9.5 billion in January, which was initially rejected. In response to Melrose’s hostile approach, GKN announced a plan to split its aerospace and automotive businesses into separate companies through the sale of its automotive business to Dana Corp. for ~$6.1 billion; however, this sale is no longer expected to occur. Since its initial hostile bid, Melrose has sweetened its offer to an estimated value of ~$11.1 billion. As part of the purchase agreement, Melrose has guaranteed that it will not sell GKN Aerospace for the next five years and that GKN will maintain its UK listing and headquarters.
The National Aeronautics and Space Administration (“NASA”) is undergoing final preparations for its Transiting Exoplanet Survey Satellite (“TESS”), which will launch from Space Launch Complex 40 at Cape Canaveral Air Force Station in Florida on April 16th. TESS will be launched and encapsulated within the payload fairing of a SpaceX Falcon 9 rocket. Sixty days after launch, and following a series of instrumentation tests, the satellite will begin a two-year survey mission during which it will monitor more than 200,000 stars for the presence of exoplanets. The survey is the first-ever all-sky transit survey, and will seek to identify planets that range from Earth-sized to gas giants.
Government Technology Solutions
Anticipation for the Navy’s $3.4 billion Next Generation Enterprise Network-Recompete is hitting a boiling point, as the solicitation is expected to drop any day now. The three companies fighting for the services track of the contract are DXC Technology (the incumbent), Leidos, and CSRA. While the winner of this contract will certainly earn a massive pay day, the real value in this victory lays in how the Navy envisions this contract to fit into its larger network modernization effort. The winner will gain a major foothold in IT modernization, an area of priority for the Trump administration, and set themselves up for more opportunities based on the Navy’s strategy to upgrade a global network that supports 700,000 Navy and Marine Corps users at 2,500 sites. DXC looks to be the front-runner to win the contract based on almost two-decades of incumbency and a strong continuing partnership with AT&T. Leidos and CSRA, however, are not sitting idly by; Leidos is partnering with IBM, Unisys, and Verizon, while CSRA plans to include team members once its acquisition with General Dynamics matures.
West Virginia is set to become the first state to allow Internet voting by blockchain in a Federal election when the state holds its primary elections on May 8th. Deployed and overseas military service members and their families in two counties will be part of the pilot test. West Virginia is using Voatz, a Boston startup, and anticipates a few dozen voters to participate in the pilot test. Voatz’s technology works by recording all votes on a blockchain, where each vote is ultimately verified by a third-party participant. This technology will be able to accurately count all votes and allow voters to participate from anywhere in the world, a feature particularly beneficial for members of the military. While some critics cite that cyberattacks could be an issue, any manipulation to the data would be easy to spot since blockchain is publicly accessible. Though there are no plans to expand the voting technology to the general public yet, West Virginia’s innovation may lead to other states quickly following suit.
Big Movers
Maxar Technologies (up 6.0%) – Share prices were up this week after the company was chosen to build Spacecom’s AMOS-8 advanced communications satellite.
AAR (up 5.2%) – Share prices were up this week after the company beat earnings per share estimates for the quarter.
Transactions
Melrose Industries plc has agreed to acquire GKN plc, a provider of design, development and manufacturing of aerospace and defense products as well as automotive and agrotechnical components. The deal is worth an estimated $11.1 billion.
White Wolf Capital’s portfolio company Consolidated Machine & Tool Holdings, LLC has acquired LCP Machine, Inc., a provider of CNC precision machining serving a number of industries, including aerospace, defense, energy and industrial. Terms of the deal were not disclosed.
