TransDigm Group Incorporated Commences Tender Offer for All Shares of Aerosonic Corporation — Press Release

CLEVELAND and CLEARWATER, Fla., May 7, 2013 /PRNewswire/ — TransDigm Group Incorporated (“TransDigm”) (NYSE: TDG) and Aerosonic Corporation (“Aerosonic”) (NYSE MKT: AIM) today announced that TransDigm’s indirect wholly owned subsidiary, Buccaneer Acquisition Sub Inc. (“Purchaser”), has commenced a tender offer to acquire all of the outstanding shares of Aerosonic common stock for $7.75 per share in cash, without interest and less any applicable withholding taxes (the “Offer”). The Offer is being made pursuant to the terms of the previously announced definitive merger agreement (the “Agreement”) entered into between TransDigm, Purchaser and Aerosonic on April 19, 2013.

If the Offer is successfully completed, pursuant to the terms of the Agreement, TransDigm expects to acquire any of the Aerosonic common shares not tendered in the tender offer through a merger transaction in which the remaining shares of Aerosonic are converted into a right to receive the same consideration per share as paid in the Offer.

The Offer is subject to customary closing conditions, including valid tender of shares representing at least a majority of Aerosonic’s then outstanding shares on a fully diluted basis. There is no financing condition to the Offer.

The Offer is scheduled to expire at 12:00 Midnight, New York City time, on Tuesday, June 4, 2013, unless otherwise extended.

As contemplated by the Agreement, Aerosonic, with the assistance of its independent advisors, will solicit superior proposals from third parties until May 29, 2013. Aerosonic does not anticipate disclosing any developments regarding this process unless and until its Board of Directors makes a decision with respect to a potential superior proposal. There is no assurance that this process will result in a superior proposal. TransDigm will terminate the Offer if Aerosonic accepts a superior proposal and terminates the Agreement in accordance with its terms.

Today, TransDigm is filing with the Securities and Exchange Commission (the “SEC”) a tender offer statement on Schedule TO, including an offer to purchase and related letter of transmittal, setting forth in detail the terms of the Offer. In addition, Aerosonic is filing with the SEC today a Solicitation/Recommendation Statement on Schedule 14D-9 setting forth in detail, among other things, the recommendation of Aerosonic’s Board of Directors that Aerosonic stockholders tender their shares pursuant to the Offer.

Copies of the offer to purchase, letter of transmittal and other related materials, including the Solicitation/Recommendation Statement, are available free of charge to Aerosonic stockholders from Georgeson Inc., the Information Agent for the Offer, at (800) 868-1390 (toll-free). The Depositary for the Offer is American Stock Transfer & Trust Company.

Advisors

Baker & Hostetler LLP is acting as legal advisor to TransDigm. Bluestone Capital Partners is acting as financial advisor and Hill Ward Henderson, PA is acting as legal advisor to Aerosonic. Hyde Park Capital also provided financial advice to Aerosonic’s Board of Directors with respect to the transaction.

About TransDigm

TransDigm, through its wholly-owned subsidiaries, is a leading global designer, producer and supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft in service today. Major product offerings, substantially all of which are ultimately provided to end-users in the aerospace industry, include mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, NiCad batteries and chargers, engineered latching and locking devices, rods and locking devices, engineered connectors and elastomers, cockpit security components and systems, specialized cockpit displays, aircraft audio systems, specialized lavatory components, seatbelts and safety restraints, engineered interior surfaces and lighting and control technology.

About Aerosonic Corporation

Aerosonic designs and manufactures proprietary, highly engineered aviation components for use on commercial and military aircraft. Major product offerings include both mechanical and digital altimeters, airspeed indicators, rate of climb indicators, microprocessor controlled air data test sets, angle of attack stall warning systems, integrated air data sensors and other aircraft sensors, monitoring systems and flight instrumentation.

IMPORTANT INFORMATION ABOUT THE TENDER OFFER

This press release is not an offer to purchase or a solicitation of an offer to sell securities of Aerosonic. TransDigm is filing today its offer to purchase and related materials with the Securities and Exchange Commission (the “SEC”) on Schedule TO, and Aerosonic is filing today its solicitation/recommendation statement with the SEC on Schedule 14D-9. AEROSONIC STOCKHOLDERS ARE URGED TO READ THESE MATERIALS CAREFULLY SINCE THEY CONTAIN IMPORTANT INFORMATION, INCLUDING TERMS AND CONDITIONS OF THE OFFER. Aerosonic stockholders may obtain a free copy of these materials and other documents filed by TransDigm or Aerosonic with the SEC at the website maintained by the SEC at www.sec.gov. In addition, these materials are available free of charge to Aerosonic stockholders from Georgeson Inc., the Information Agent for the Offer, at (800) 868-1390 (toll-free).

Some of the statements in this press release constitute “forward-looking statements.” These statements are related to the expected timing, completion and effects of the proposed transaction or other future events, , and may be identified by terminology such as “may,” “will,” “should,” “expects,” “scheduled,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “potential,” or “continue,” or the negative of such terms, or other comparable terminology. These statements are only predictions and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Aerosonic and TransDigm might not be able to complete the proposed transaction on terms described above, other acceptable terms or at all because of a failure to satisfy closing conditions, including receipt of sufficient tenders, or other factors. Aerosonic and TransDigm make no promise to update any forward-looking statement, whether as a result of changes in underlying factors, new information, future events or otherwise.

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TransDigm Group Incorporated And Aerosonic Corporation Announce Acquisition Agreement — Press Release

Aerosonic Stockholders to Receive $7.75 per Share in Cash in $39 Million Transaction

CLEVELAND and CLEARWATER, Fla., April 22, 2013 /PRNewswire/ — TransDigm Group Incorporated (“TransDigm”) (NYSE: TDG) and Aerosonic Corporation (“Aerosonic”) (NYSE MKT: AIM) today announced a definitive merger agreement, providing for Aerosonic to become an indirect wholly-owned subsidiary of TransDigm. TransDigm and Aerosonic both design, manufacture and supply highly engineered aircraft components.

Under the terms of the agreement, TransDigm will offer to acquire all of the outstanding shares of Aerosonic for $7.75 per share in cash in a transaction valued at approximately $39 million on a fully-diluted basis. The cash consideration represents a premium of approximately 59.8% to Aerosonic’s closing share price on April 19, 2013, and a 77.8% premium to its average trading price over the trailing 60 days. The transaction will be funded with TransDigm’s cash on hand and is not subject to any financing condition.

W. Nicholas Howley, Chairman and Chief Executive Officer of TransDigm stated, “Aerosonic designs and manufactures highly engineered, proprietary air data sensing, test and display components for use primarily in the business jet, helicopter and military markets. Major customers include the U.S. Government and Boeing. About 55% of total revenue is derived from the commercial market and 60% from the aftermarket. We are pleased to have an agreement to acquire Aerosonic. The proprietary nature of these products, along with aftermarket content, fit well with our overall business strategy.”

Doug Hillman, Aerosonic’s President and CEO, stated “We are excited to have Aerosonic join a growth oriented partner and industry leader. This merger will allow Aerosonic to leverage its proprietary air data and display technologies via TransDigm’s broad market presence and financial strength, enhancing the growth prospects of the TransDigm team.”

Under terms of the merger agreement, the parties anticipate TransDigm will commence a tender offer for all of the outstanding shares of Aerosonic on or before May 9, 2013. The tender offer will not be closed until conclusion of the “go shop” period described below. TransDigm’s obligation to accept and purchase Aerosonic common shares tendered pursuant to the offer will be subject to customary closing conditions, including valid tender of common shares representing at least a majority of Aerosonic’s voting power on a fully-diluted basis. If the first-step tender offer is successfully completed, TransDigm will acquire any of the Aerosonic common shares not tendered in the tender offer through a second-step merger transaction in which the remaining shares of Aerosonic are converted into a right to receive the same consideration per share as paid in the tender offer. The merger agreement was unanimously approved by the Board of Directors of Aerosonic and the Board recommends that Aerosonic stockholders tender their shares in the tender offer contemplated by the merger agreement.

As contemplated by the merger agreement, Aerosonic, with the assistance of its independent advisors, will solicit superior proposals from third parties during the next 40 days. Aerosonic does not anticipate disclosing any developments regarding this process unless and until its Board of Directors makes a decision with respect to a potential superior proposal. There is no assurance that this process will result in a superior proposal. TransDigm will terminate its tender offer if Aerosonic accepts a superior proposal and terminates the merger agreement in accordance with its terms.

Advisors

Baker & Hostetler LLP is acting as legal advisor to TransDigm. Bluestone Capital Partners is acting as financial advisor and Hill Ward Henderson, PA is acting as legal advisor to Aerosonic. Hyde Park Capital also provided financial advice to Aerosonic’s Board of Directors with respect to the transaction.

About TransDigm

TransDigm, through its wholly-owned subsidiaries, is a leading global designer, producer and supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft in service today. Major product offerings, substantially all of which are ultimately provided to end-users in the aerospace industry, include mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, NiCad batteries and chargers, engineered latching and locking devices, rods and locking devices, engineered connectors and elastomers, cockpit security components and systems, specialized cockpit displays, aircraft audio systems, specialized lavatory components, seatbelts and safety restraints, engineered interior surfaces and lighting and control technology.

About Aerosonic Corporation

Aerosonic designs and manufactures proprietary, highly engineered aviation components for use on commercial and military aircraft. Major product offerings include both mechanical and digital altimeters, airspeed indicators, rate of climb indicators, microprocessor controlled air data test sets, angle of attack stall warning systems, integrated air data sensors and other aircraft sensors, monitoring systems and flight instrumentation.
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GeoEye and DigitalGlobe Receive Antitrust Clearance in Connection with Pending Combination — Press Release

HERNDON, Va., Jan. 9, 2013 /PRNewswire/ — GeoEye, Inc. (NASDAQ: GEOY), a leading source of geospatial information and insight, announced that it has received antitrust clearance from the U.S. Department of Justice in connection with its pending combination with DigitalGlobe, Inc. (NYSE: DGI).

As previously announced, on July 23, 2012, the boards of directors of both GeoEye and DigitalGlobe unanimously approved a definitive merger agreement under which the companies will combine. Completion of the transaction is subject to satisfaction of other customary closing conditions, including obtaining regulatory approval from the Federal Communications Commission (FCC) and the National Oceanic and Atmospheric Administration (NOAA). GeoEye is working cooperatively with the FCC and NOAA, and the transaction is expected to close by January 31, 2013. Shareowners of both GeoEye and DigitalGlobe have previously voted overwhelmingly in favor of the combination. Simultaneous with the closing of the transaction, the company expects to complete a $1.2 billion refinancing, which is expected to include a combination of senior notes and senior secured credit facilities.

Pursuant to the Agreement and Plan of Merger between the parties and the anticipated closing date of January 31, 2013, all stockholder election forms with respect to the consideration to be received in the merger by GeoEye stockholders must be received by the Exchange Agent, American Stock Transfer & Trust Company, LLC (AST) by no later than 5:00 p.m., New York City time, on January 29, 2013. Further information regarding the stockholder election form may be obtained by contacting AST toll free at (877) 825 – 8619.

About GeoEye

GeoEye is a leading source of geospatial information and insight for decision makers and analysts, who need a clear understanding of our changing world to protect lives, manage risk and optimize resources. Each day, organizations in defense and intelligence, public safety, critical infrastructure, energy and online media rely on GeoEye’s imagery, tools and expertise to support important missions around the globe. Widely recognized as a pioneer in high-resolution satellite imagery, GeoEye has evolved into a complete provider of geospatial intelligence solutions. GeoEye’s ability to collect, process and analyze massive amounts of geospatial data allows our customers to quickly see precise changes on the ground and anticipate where events may occur in the future. GeoEye is a public company listed on NASDAQ as GEOY and is headquartered in Herndon, Virginia with more than 700 employees worldwide. Learn more at www.geoeye.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Without limitation, the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “will” and similar expressions are intended to identify forward-looking statements. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future, including statements relating to growth, expected levels of expenditures and statements expressing general optimism about future operating results, are forward-looking statements. Similarly, statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. All such forward-looking statements and those presented elsewhere by our management from time to time are subject to certain risks and uncertainties that could cause actual results to differ materially from those in forward-looking statements. These risks and uncertainties include, but are not limited to, those described in “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2011, which we filed with the Securities and Exchange Commission (“SEC”) on March 13, 2012, as updated in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2012, June 30, 2012, and September 30, 2012, which we filed with the SEC on May 4, 2012, August 7, 2012, and November 6, 2012, respectively. Copies of all SEC filings may be obtained from the SEC’s EDGAR Web site, http://www.sec.gov or by contacting: William L. Warren, Executive Vice President, General Counsel and Secretary, at 703-480-5672.

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Camber Acquires Novonics — Press Release

HUNTSVILLE, Ala., Dec. 17, 2012 /PRNewswire/ — Camber Corporation, a world class solutions company, has acquired Novonics Corporation — combining their preeminent tactical systems software and simulation capability with Camber’s systems integration and engineering, cyber security, acquisition management, logistics and sustainment, and interactive training to federal government and commercial customers worldwide. Novonics, with primary offices in Washington, D.C., Bloomington, Ind,, San Diego, Calif.,, Orlando, Fla. and Virginia Beach, Va, provides simulation based learning systems, software/systems design and development, user introduction of complex technologies, and program and strategic planning for Department of Defense and international partners.

Utilizing simulation and distributed networks to accomplish learning and support mission-critical exercises decreases costs and increases readiness by allowing preparation and training in multiple scenarios. Decreasing budgets and increasing demand for more effective and efficient training will require even more innovative training and simulation capability. The addition of Novonics enhances that existing capability in Camber’s portfolio.

“We welcome Novonics employees to our Camber family. Novonics’ experience, customer knowledge and successful project execution is an excellent strategic fit for Camber Corporation. Novonics will build upon Camber’s existing foundation of simulation-based training, network test and evaluation, command and control, information management, and training architectures. We are proud to have them on board,” said Walter Batson, Jr., Camber’s CEO. “The merging of our teams will provide our customers and the simulation community with even higher quality solutions for their mission requirements.”

About Camber
Headquartered in Huntsville, Alabama, Camber Corporation provides mission-critical engineering and technical services to Aerospace & Defense, National Security, and International governments and commercial customers at over 100 locations worldwide. Camber’s capability areas include: engineering and advanced technology applications; training and simulation; and operations, analysis, and mission support. Camber supports its customers in meeting important security and disaster relief requirements throughout the federal government and in over 25 countries in Europe, Asia, and Africa. For more information on Camber, please visit www.camber.com

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Raytheon acquires technology development firm Teligy, Inc. — Press Release

Extends critical cybersecurity offerings in wireless communications

GARLAND, Texas, Oct. 22, 2012 /PRNewswire/ — Raytheon Company (NYSE: RTN) has acquired Teligy, Inc., a technology development company, further extending Raytheon’s cybersecurity offerings in wireless communications, vulnerability analysis, reverse engineering and custom kernel software/device driver development. These critical focus areas represent top priorities of intelligence, defense and commercial organizations worldwide.

Terms of the transaction were not disclosed. The transaction will not materially impact Raytheon’s total company sales or earnings per share for the fourth quarter of 2012 or fiscal year 2013.

Teligy excels at transitioning prototype and proof of concept cyber products into deployable solutions. Coupled with Raytheon’s existing expertise, Teligy enables Raytheon to cover the entire communication stack for both wired and RF technologies across all relevant platforms, and provides access to emerging markets.

“The Teligy acquisition adds critical wireless capabilities that address the needs of our cybersecurity customers in the intelligence, DoD and federal communities,” said Lynn Dugle, president of Raytheon’s Intelligence and Information Systems business. “Teligy is comprised of highly skilled and proven performers with strong customer focus, and we are excited to welcome them as members of our team.”

Founded in 2002, Teligy, Inc., is headquartered in Greer, S.C. Co-founders Vic Gunter, vice president of Engineering, and Jason Yates, vice president of Development, will remain with the company.

“We are thrilled with this opportunity to join the Raytheon team,” said Yates. “This acquisition will enable Teligy to rapidly scale our capabilities and bring additional value to both Raytheon and Teligy customers.”

The acquisition of Teligy marks Raytheon’s 11th cyber-related acquisition since 2007. Raytheon continues to build upon its innovative, non-traditional approaches to cyber resiliency in the face of advanced persistent threats. Raytheon’s three decades of experience in cybersecurity provides customers with solutions to anticipate, withstand, recover and evolve from cyber attack and new threats as they emerge.

About Raytheon

Raytheon Company, with 2011 sales of $25 billion and 71,000 employees worldwide, is a technology and innovation leader specializing in defense, homeland security and other government markets throughout the world. With a history of innovation spanning 90 years, Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as a broad range of mission support services. Raytheon is headquartered in Waltham, Mass. For more about Raytheon, visit us at www.raytheon.com and follow us on Twitter @raytheon.

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ARINC to divest its Defense Systems Engineering and Support business — Press Release

ARINC to divest its Defense Systems Engineering and Support business; Company to continue its focus on high growth communications and IT services

Annapolis, Maryland, USA, October 16, 2012—Earlier today, ARINC Incorporated announced that it had entered into a definitive agreement to sell its Defense Systems Engineering & Support (DSES) Division to Booz Allen Hamilton. The sale is expected to close later this Fall, subject to customary closing conditions. Following the closing, ARINC will continue to focus on growing its market leading commercial businesses.

This action will enable ARINC to invest and expand its innovative, mission-critical systems and solutions including the e-Enabled Aircraft Solution, AviNet Global data Network Solutions, GLOBALink voice and data Services, new airport passenger processing systems such as self-boarding gates, positive train control solutions, aircraft modernization programs for aging government aircraft, public safety radio networks for first responders and high end security systems for critical infrastructure.

“Going forward ARINC is strongly positioned to grow and excel. ARINC is number one in many of the commercial markets we serve through a continued focus on customer service, the quality of our solutions and innovation. We would like to thank all of our DSES employees for their significant contribution to ARINC’s success. The employees of our DSES business are joining a quality company with an established customer base that we believe will provide a great environment to continue maximizing their talents” said John Belcher, Chairman & CEO of ARINC.

ARINC has experienced rapid growth over the past decade. The Company’s International Division has grown through a rapid geographic expansion into over 150 countries. ARINC is recognized as the global leader in transportation communications, engineering and systems integration.

ARINC Incorporated provides communications, engineering and integration solutions for commercial and government customers worldwide. Headquartered in Annapolis, Maryland with regional headquarters in London and Singapore, ARINC is ISO 9001:2008 and AS9100:2009 Rev C certified. For more information, visit the web site at www.arinc.com.

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General Dynamics Acquires Open Kernel Labs, Inc. — Press Release

FALLS CHURCH, Va., Sept. 10, 2012 /PRNewswire/ — General Dynamics (NYSE: GD) has acquired Open Kernel Labs, Inc. (OK Labs), expanding its capabilities as a provider of secure mobile devices for public safety, civilian, military and commercial customers as well as in-vehicle infotainment systems (IVI) for the commercial market. OK Labs, a Chicago-based, privately held corporation, is a leading provider of virtualization software for securing wireless communications, applications and content for mobile devices and automotive in-vehicle infotainment systems. The value of the cash transaction has not been disclosed.

OK Labs will become part of General Dynamics Broadband, a subsidiary of General Dynamics C4 Systems. This transaction enhances General Dynamics’ ability to meet growing government and military needs for secure computing on commercial handheld devices.

OK Labs’ “Defense-Grade” solutions for commercial devices enable secure separation of corporate data and applications from a user’s personal data stored or accessed on the same device. This feature broadens General Dynamics’ range of device offerings in the expanding public-safety broadband market and mobile device markets, and complements General Dynamics’ 40-year history of providing encryption technology to protect voice and data communications classified up to the Top Secret level.

“Government and corporate CIOs want the advantages of today’s commercial mobile devices without having to sacrifice the integrity and security of their networks,” said Chris Marzilli, president of General Dynamics C4 Systems. “OK Labs’ market-leading expertise in implementing security on commercial devices delivers ease of use and reduced cost to customers.”

OK Labs’ software is deployed on more than 1.6 billion government and commercial devices worldwide. Their technology supports a “bring-your-own-device” environment, allowing smart phones and other portable computing devices to be securely used for personal and business applications simultaneously. OK Labs’ solutions also make it easier for engineers to design, deploy and maintain software for these platforms.

OK Labs also provides automotive virtualization solutions by enabling the separation of dashboard applications (multimedia, infotainment) from core automotive functions without compromising safety, security or reliability.

More information about General Dynamics Broadband is available at www.gd-broadband.com.

General Dynamics C4 Systems (www.gdc4s.com) designs, manufacturers and delivers trusted and secure communications systems, command and control systems and operational hardware to customers within the U.S. Department of Defense, federal and civilian agencies, the intelligence community and international customers.

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United Technologies to sell Rocketdyne unit to GenCorp Inc. — Press Release

HARTFORD, Conn., July 23, 2012 /PRNewswire/ — United Technologies Corp. (NYSE: UTX) today announced it has reached agreement to sell its Rocketdyne unit, currently part of Pratt & Whitney, to GenCorp Inc. for $550 million. The transaction is expected to close in the first half of 2013.

As previously announced, proceeds from the sale will be used to repay a portion of the short-term debt incurred to finance the proposed acquisition of Goodrich Corporation. The transaction is subject to customary closing conditions, including regulatory approvals.

“We are pleased to announce GenCorp’s agreement to purchase Rocketdyne. It is a significant step in our ongoing portfolio transformation,” said UTC Chairman & Chief Executive Officer Louis Chenevert. “While it is not core to UTC’s commercial building systems and aerospace businesses, Rocketdyne is a solid company and a national asset with many talented employees. Leading up to the closing with GenCorp, we will remain focused on operational excellence and 100 percent mission success.”

United Technologies Corp., based in Hartford, Connecticut, is a diversified company providing high technology products and services to the building and aerospace industries.

This release includes “forward looking statements” concerning a proposed transaction, its financial and business impact, management’s beliefs and objectives with respect thereto, and management’s current expectations for our future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “expectations,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “target,” “anticipate,” “will,” “should,” “see,” “guidance,” “confident” and other words of similar meaning in connection with a discussion of future operating or financial performance. It is uncertain whether the events anticipated will transpire, or if they do occur what impact they will have on the results of operations and financial condition of UTC and of the combined companies. These forward looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those anticipated, including but not limited to the ability of the parties to satisfy the conditions precedent and consummate the proposed transaction, the timing or consummation of the proposed transaction, the ability of the parties to secure regulatory approvals in a timely manner or on the terms desired or anticipated, and the ability to realize opportunities for growth and innovation. Other important economic, political, regulatory, legal, technological, competitive and other uncertainties are identified in the SEC filings submitted by UTC and Goodrich from time to time, including their respective Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K, and Current Reports on Form 8-K. The forward looking statements included in this press release are made only as of the date hereof. UTC does not undertake any obligation to update the forward looking statements to reflect subsequent events or circumstances.

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SAIC Expands Healthcare IT Business Line – Seeking Alpha

Here is an article I wrote for Seeking Alpha about SIAC’s recent acquisition of a healthcare IT business.

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SAIC To Acquire maxIT Healthcare — Press Release

Company Adds Leading Healthcare IT Consulting Firm To Health Solutions Business, Bolstering Growth Plans In Commercial Healthcare Market

MCLEAN, Va., July 17, 2012 /PRNewswire/ — Science Applications International Corporation (SAIC) (NYSE: SAI) today announced it has entered into a definitive agreement to acquire maxIT Healthcare Holdings, Inc., a leading healthcare IT (Information Technology) consulting firm based in Westfield, Ind.

maxIT Healthcare, the largest private independent healthcare IT consulting company in North America, provides a comprehensive range of healthcare IT services and solutions primarily to commercial hospital groups and other medical delivery organizations. These include IT strategy and planning, electronic health record (EHR) implementation and optimization, and management consulting across a broad range of activities such as accountable care transformation, revenue cycle improvement, and support in meeting the U.S. Government’s meaningful use requirements necessary to obtain incentive payments from the government in connection with implementing EHR capability.

maxIT Healthcare has an extensive commercial customer base and has served more than 600 hospitals, hospital groups, physician practices and accountable care organizations (ACOs) in the U.S. and Canada. The company’s established expertise and knowledge within commercial hospitals and ambulatory clinics, as well as its exceptional reputation, will be combined with SAIC’s Vitalize Consulting Solutions (VCS) team, which SAIC acquired in 2011, bringing together some of the best consultants in the commercial healthcare industry. This combination creates the nation’s largest commercial consulting practice in EHR implementation and optimization services and enables the combined operations to better serve healthcare providers by helping them achieve their universal objectives – reduced healthcare costs, effective use of data to make more informed decisions, and improved patient care.

The combination of maxIT Healthcare with VCS also strengthens SAIC’s capabilities to provide EHR implementation and integration services to its strong base of Federal healthcare customers as they increasingly migrate toward the incorporation of commercial off the shelf (COTS) EHR applications. As both commercial and Federal healthcare providers begin to fully extract value from their EHR solutions, SAIC is well positioned to leverage its service offerings in systems integration and interoperability, health sciences and advanced data analytics to assist providers in realizing the promise of personalization in delivering value based healthcare.

As a result of the acquisition, approximately 1,300 employees from maxIT Healthcare will join SAIC’s Health Solutions Business Unit (HSBU), led by Steve Comber. HSBU is a part of the Health, Energy and Civil Solutions Group, led by SAIC Group President Joe Craver.

“The maxIT Healthcare team brings significant capabilities and talent to SAIC, as well as an outstanding reputation with its customers for providing the highest level of service,” said Craver. “Combined with our acquisition of VCS, this deal enhances SAIC’s capabilities to address the nation’s challenge of rising healthcare costs, access to quality care, and the need to improve patient outcomes.”

“The combined strengths of maxIT, SAIC and VCS will be a significant differentiator in the healthcare IT market. We look forward to continued growth as part of the SAIC team, while maintaining flexibility to meet the ever-changing needs of the healthcare market,” said Mike Sweeney, president and CEO of maxIT Healthcare.

Parker Hinshaw, maxIT Healthcare founder, added, “We share so much already with the SAIC team – high ethical values and culture, financially sound business practices, and most importantly, our passion for making a significant difference in one of the most important industries in the world, healthcare.”

The acquisition is expected to close in August 2012, subject to customary closing conditions, including expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. At closing, SAIC will pay approximately $473 million, subject to adjustment, from cash on hand to acquire maxIT Healthcare. In addition, SAIC expects to pay up to $20 million to maxIT Healthcare shareholders after receipt of certain tax refunds following closing.
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Defense M&A — Seeking Alpha

Here is an article I wrote for Seeking Alpha on potential defense M&A activity.

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L-3 Expands Electro Optical Business with Acquisition of Kollmorgen

L-3 Communications (LLL) expanded its electro optical business by completing the acquisition of Kollmorgen from Danaher Corporation. The transaction closed for a price of about $210 million. Kollmorgan primarily makes optical systems for U.S. and other nation’s submarines.

L-3 already has a growing electro-optical sensor business and the addition of Kollmorgen will only add to that growth. In their most recent quarterly report the company reported earnings of $2.72 a share on net sales of $4 billion. This was an increase of earnings of twenty-eight cents over the previous year. Interestingly the Electronics Systems division of the company where Kollmorgen will fall had a decline in net sales of $110 million in 2011 primarily due to less demand for night vision products, power devices and the lack of revenue from technology licenses. The division did, though, sell $43 million more in Electro-Optical / Infra-Red (EO/IR) products.

Kollmorgen is estimated to add sales of $160 to $170 million and earnings of up to $30 million for L-3. This additional revenue will help offset any further drops in sales by the Electronics Systems part of the company.

The addition of the company to L-3 allows them to expand their overall market share of the EO/IR business. With the expected reductions in U.S. defense spending the more diverse product line and markets should help L-3 maintain its sales and earnings. For 2012 the company is predicting $14.4 to $14.6 billion in sales and earnings per share (EPS) of between $8.35 and $8.55. This compares to sales of $15.17 billion in 2011 and EPS of $8.77. Clearly L-3 is expecting some contraction in the defense business in the coming year. This estimate does not include Kollmorgen.

As will all of the defense industry L-3 will have to adjust to the changing market in 2012 and one way of doing this is through M&A. The addition of Kollmorgen not only adds revenue and earnings but also increases their exposure in the EO/IR market while reducing potential competitors. There should be more moves of this type by defense contractors as they make moves to cushion the changes in spending.

Photo from Daniel Garcia Neto’s flickr photostream

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Seeking Alpha: Potential Areas For Defense M&A

I published an exclusive article at Seeking Alpha on future M&A activity among defense contractors. It may be found here.

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General Dynamics To Acquire Force Protection

In a major shakeup of the U.S. armored vehicle industry General Dynamics (GD) announced late yesterday that it intends to acquire Force Protection (FRPT). GD is one of the largest defense contractors in the United States and makes a diverse product line including the Stryker wheeled combat vehicle, submarines, C4I systems and other defense related systems. Force Protection came to the fore in the middle part of the last decade as a successful provider of Mine Resistant Ambush Protected (MRAP) vehicles used by the U.S. and its Allies in Iraq and Afghanistan.

GD will pay about $5.52 a share for the South Carolina based company for a total cost of around $360 million. The transaction still needs to go through all of the necessary shareholder and Government wickets but GD hopes to close it out by the end of 2011.

Force Protection is a good example of the boom-and-bust aspect of the defense industry. They were early producers of MRAP vehicles selling quite a few to select customers before in 2004-2005 Congress and the DoD decided to invest in thousands of the heavily armored vehicles. MRAP were seen as the best counter to the mine and Improvised Explosive Device (IED) threat in Iraq and Afghanistan that were causing hundreds of casualties among U.S. troops traveling in their support vehicles which tended not to be heavily armored.

MRAP were bought initially to equip engineering units responsible for removing these threats but then became standard tactical vehicles. Hundreds were purchased from a variety of suppliers including Force Protection, Navistar (NAV), BAE Systems (BAE:LSE) and other companies across the globe. Factories sprang up in South Carolina, Mississippi and other states to produce them. The U.S. used rapid acquisition to buy the MRAP, spares and logistical support and by 2007 deaths were much reduced.

Force Protection’s earnings and stock mirrored this boom going up to a high in 2008 in the mid-$20 range. Unfortunately at a certain point the U.S. had purchased all that it needed especially of the first generation MRAP and by the end of 2008 Force Protection was struggling to make a profit and its stock had dropped below $10.

The company did not win contracts for the new MRAP vehicle being purchased for Afghanistan losing out to Oshkosh (OSK) for the MRAP-ATV contract. It had bid on some other work like Australia’s and Canada’s new armored vehicles but those contracts are yet to be awarded. It did in 2010 win a contract to build vehicles for the U.K. worth a substantial amount.

The acquisition by GD reflects the changing market that currently exists. With defense cuts coming it will be hard for the U.S. to support multiple suppliers for this product. GD gains manufacturing capability and staff who will make money supporting their existing vehicles and will help GD with the design and production of new systems.

It can be expected that there will be an uptick in M&A with mid-level companies like this that will see limited markets. The U.S. Government has made clear that it is not in favor of the bigger defense contractors merging as happened in the Nineties but the cut backs will see many smaller corporations disappear either changing markets or being absorbed by their competitors.

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Cobham Sells Sparta Unit to Parsons

In yet another M&A action in the defense industry British contractor, Cobham plc (COB:LSE), has agreed to sell its Analytic Solutions group to Parsons Corporation. The transaction is estimated at about $350 million.

Sparta was formerly a private company started in 1979 that provides SETA support as well as technical products and services to the U.S. defense and intelligence business sector. The company was acquired by Cobham a few years ago. Foreign defense contractors, especially those from Great Britain, had grown their presence in the U.S. defense market in the last decade through mergers, acquisitions as well as winning some contracts. Due to the rapid expansion of the defense budget post-9/11 the market was their for them to provide competition to the U.S. domestic industry.

Sparta provides design, development, fielding and sustainment support for ballistic missile defense systems primarily working through the Missile Defense Agency (MDA). It also supports tactical weapon systems especially in the area of logistics as well as network-centric warfare operations. Sparta also supports the intelligence community through developing software and hardware tools and operating computer networks and systems.

Parson’s is about a $2.7 billion engineering support company that not only provides defense services but also civil efforts across the globe. These include engineering and construction, transportation and infrastructure support. Many of their efforts in defense have synergy with Sparta’s but they provide some that are different such as range and training support. Parson’s revenue recently peaked in 2008 and is now about $700 million less then that year. Stock price and Net Operating Income though have gone up steadily though.

If the U.S. defense budget does see major cuts it might be harder for the U.K. and other non-U.S. companies to sustain their current level of revenue. The pressure to always choose a domestic provider will be high on the U.S. Defense Department and the Services. Cobham could also be looking at the market and believing that what Sparta provides may be an area of shrinkage or more competition and now has decided to focus on more core assets. Sparta formed one of nine business units in the company. Last year the company had revenue of about $3 billion.

If the expected decline in defense spending does occur then the U.S. defense industry may see major consolidation as happened in the 1990’s though M&A as well as companies moving out of the sector. The government reportedly has made it clear that they would not like to see any of the big 5 defense contractors (Boeing (BA), Raytheon (RTN), Lockheed Martin (LMT), Northrop Grumman (NOC) and General Dynamics (GD), who are the primary hardware providers merge as did happen in the 90’s.

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Defense Industry Projects a Good 2011 but 2012 and Out Look Worse

Most of the large and mid-sized defense contractors reported their most recent quarterly results in the last few weeks. While for the quarter the results were mixed with some seeing decent increases in earnings and revenue while others saw a drop overall they all felt that they would meet or exceed their estimates for the full year. The 2011 defense budget still remained high due to the extra spending for Afghanistan and Iraq as well as investment in some major weapon systems. The 2012 budget is working its way through Congress and will see some reductions based on proposals by the Services as well as Congress’ directed cuts but overall will be about the same as 2011. Spending beyond that could be considerably reduced based on the new debt reduction “super committee” as well as the pressure to decrease overall Federal deficits.

As the focus of the defense budget changes from paying for the troops in Afghanistan and Iraq and the equipment and supplies they need to invest in new systems to replace older one or achieve new technologies some defense contractors will prosper over others. If the discussed defense cuts are followed through and amounts vary from $35 billion to $70 billion a year from a $700 billion budget then some major programs will be canceled, the size of the military will decrease greatly and parts of the defense industry in the U.S. will disappear. This will either be through M&A activity or just loss of contracts causing companies to fold up.

There have already been moves by the larger defense contractors to adjust to the potential changes in how the U.S. Defense Department spends its money. ITT Corporation (ITT) has decided to split yet again into three different companies basically separating their flat performing defense business from more successful water and chip manufacturing areas. L-3 Communications Holding (L3) while it had a good quarter announced that it too was spinning off part of itself to adjust to what it sees as the future in the U.S. It is setting up its Scientific, Engineering, Technical and Analytical (SETA) business as a new company. SETA contractors support government offices most often in acquisition and research and development. Many of these positions were converted to government positions and new Organizational Conflict of Interest (OCI) rules prevent companies that provide SETA services to also bid on large hardware programs. L-3 is adjusting by getting out of the business.

Perhaps the biggest adjustment was by Northrop Grumman (NOC) who moved to separate their entire shipbuilding segment earlier this year. Rather then sell it to one of their competitors they set up a new company entirely, Huntington Ingalls Industries (HII). This was in realization that future U.S. Navy shipbuilding plans were so limited it could not necessarily support the current number of shipyards in the U.S. HII has already moved to close its yard in Louisiana with significant effect on the local economy.

Other companies have moved out to use M&A to position themselves. Many of the larger companies such as Boeing (BA) and Lockheed Martin (LMT) have been buying intelligence and cyber security companies to expand their opportunities. General Dynamics (GD) earlier this week made a big move by spending almost $1 billion on a health IT company. With the focus on health care reform including improvements in record keeping and storage IT may become a big source of business for government contractors. The company, Vangent, which was privately held also just completed a large contract with the Census Bureau that should be offered again in a few years.

The U.S. military is pursuing some large programs over the next decade. These if they are canceled or cut back will have the largest effect on revenues and earnings. For Lockheed Martin it is the F-35 Joint Strike Fighter that is finally moving towards large scale production. A reduction in planned quantities will severely affect that company. For Boeing it is the KC-46A new aerial tanker as the Air Force plans to buy at least 179 initially at a cost of over $30 billion. General Dynamics has major ship and submarine construction programs and the Navy if it cuts these will limit GD’s future performance.

Right now the next several months should see major defense contractors maintain their revenues and earnings except in odd cases where contracts are restructured or ending. Once the 2012 budget is decided upon that will give an indication of how next year will be. Then 2013 and out should start to see some cuts in defense spending with similar effect on the companies. It can be expected that there will be a decrease in performance accelerating if severe cuts are made by the United States. The ability of the contractors to move to different business areas in response to these cuts will dictate how badly they are affected. All indications are right now that this sector will struggle in the next few years to maintain what they have let alone growing it even more. There may be more moves coming similar to those by Northrop, ITT and L-3.

Photo from Images_of_Money’s Flickr photostream.

Article first published as Defense Industry Projects a Good 2011 but 2012 and Out Look Worse on Technorati.

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EADS is Realizing that Bigger is not Better

The European aerospace giant, EADS (EADS:P), was formed by combining Airbus and parts of the French and German defense industry. It has joint management and has significant ownership by the governments of those two companies and right now has three main headquarters: two for EADS in the different countries and one for Airbus in the south of France. The company has made impressive growth in the defense sector establishing a U.S. subsidiary and winning some contracts there but still remains primarily European market based.

Because of current European stock ownership rules EADS, a Dutch incorporated company, is looking a making some changes. There are concerns by the two governments and their companies which between them hold almost 45% of EADS stock that they are tying up too much of their capital in the company. European law forbids companies from using their “golden shares” to control non-defense companies. This means that technically EADS, despite its size and valuation, is still vulnerable to a hostile takeover.

One way that all of this could be fixed as well as reducing overhead would be to move Airbus to a separate company, again, and establish the defense arm, Cassadian, as one as well. Airbus remains 80% of the current company’s revenue and earnings. Headquarters could be reduced by at least one as most of EADS would move to Airbus’ reducing overhead and costs. It also would mean that France and Germany could reduce their stock holdings of Airbus and reduce their total capital investment in what would now be two companies.

Splitting Cassadian off might also help EADS North America, the U.S. subsidy, in growing through acquisitions. EADS has tried several of these over the last few years with some failing due to the requirements levied on a foreign owned company. EADS while it has some success has not been able to grow as well as it had hoped in the U.S. EADS also would be able to perhaps adjust for the fact that most of its customers pay it in Dollars while it uses Euros to pay its suppliers. The current exchange rate does affect its profits.

EADS is also facing a changing market. It is clear that the U.S. and European defense budgets will not be growing as fast as they have these last ten years. Price is also becoming a major concern for the Pentagon and major defense contractors in the United States are reacting by reducing their overhead and workforce. EADS will have to follow suit if it wants to remain competitive. A major way to reduce the price of a contract proposal is to remove overhead. Eliminating a portion of their current corporate structure would be part of that. So far EADS has not announced similar moves with its workforce as General Dynamics (GD), Boeing (BA) and Lockheed Martin (LMT) have.

EADS has had to confront the issues of being a major commercial aircraft manufacturer as well as a defense contractor several times in the past. Like Boeing it has been able to balance off poor commercial performance with defense work but right now the major market is for commercial airliners as Boeing introduces the 787 and EADS their proposed A320 update and eventual replacement. The obvious decline in defense spending also means that defense work will become more competitive, especially in the U.S., and new contracts will be harder to find. The discussion of major changes with EADS structure shows that the company is planning some perhaps radical moves in reaction to the current economic situation. These potential moves ultimately may prove the right ones in the long term.

Article first published as EADS is Realizing that Bigger is not Better and is Discussing Some Radical Moves on Technorati.

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Salient Federal Solutions Acquires Command Information — Press Release

Salient Federal Solutions Acquires Command Information

Company Broadens Cyber Security Capability and Expands Access to Clients through Prime Position on ENCORE II Contract

PR Newswire

FAIRFAX, Va., March 2, 2011

FAIRFAX, Va., March 2, 2011 /PRNewswire/ — Salient Federal Solutions, Inc. (Salient), a leading provider of Federal IT and engineering solutions, today announced the acquisition of Command Information and its wholly-owned subsidiary AnviCom, a premier provider of net-centric information technology services and solutions for government and industry, headquartered in Alexandria, VA. This acquisition will deepen Salient’s software development capability, extend its cyber security offerings, and enhance access to clients through a prime position on the ENCORE II contract vehicle.

A market leader in IPv6 technology, Command Information brings technology, consulting and engineering expertise in cyber security and deep packet inspection to the expanding generation of modern networks. The company’s strong legacy in enterprise transportation services and solutions has earned it SEI CMMI® Level 3 certification for the past five years.

“For nearly 20 years Command Information and its wholly-owned subsidiary, AnviCom, have successfully developed and maintained complex systems with a tremendously talented team of experts,” said Brad Antle, president and CEO of Salient. “The addition of the Command Information and AnviCom teams to our company will allow us to further fulfill our mission to deliver highly adaptive technology and engineering solutions that enable clients to meet the pressing needs of today.”

Specifically, with the acquisition of Command Information, Salient will have a significant presence at the United States Transportation Command, providing 24/7/365 tracking of in-transit cargo worldwide. Additionally, Salient will be at the forefront of IPv6 intrusion detection and prevention through the offering of Assure6 (TM), an award-winning enterprise-wide IPv6 policy management product. Most importantly, existing and potential customers will have direct, streamlined access to the company’s services, through DISA’s Encore II IDIQ contract.

About Salient Federal Solutions: Salient Federal Solutions is a leading provider of Federal IT and engineering solutions that enable government and industry to respond quickly to new or surge mission requirements with exactly the right people, skills, expertise and technical solutions. The company works to accelerate mission impact by delivering highly adaptable technology services, engineering solutions, and domain expertise that enable customers to rapidly meet the pressing requirements of today, while anticipating tomorrow’s evolving challenges. Salient Federal Solutions is headquartered in Fairfax, VA, with offices in Charlotte, Colorado Springs, Orlando, San Diego and Tampa. For more information visit www.salientfed.com.

SOURCE Salient Federal Solutions, Inc.

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Phillips Service Industries Acquires Skytronics, Inc. — Press Release

Phillips Service Industries Acquires Skytronics, Inc.

LIVONIA, Mich., Feb. 21, 2011 /PRNewswire/ — Phillips Service Industries, Inc. (PSI), a global manufacturing and service corporation that serves a wide variety of industries with its diverse collection of technology-based companies, announced today that it has acquired Skytronics, Inc., a leading aircraft component manufacturer and maintenance repair organization located in El Segundo, CA.

Skytronics specializes in the manufacturing, repair, overhaul and sales of aircraft ball screw and actuator assemblies and the transmissions that drive them. Skytronics is an OEM that also holds license parts manufacturing authority on stabilizer ball screws installed on Boeing 727/737/747/757/767 aircraft, as well as a distributor of both new and overhauled aircraft components.

Established in 1956, Skytronics has been an FAA-approved Repair Station for over 50 years, with current FAA, EASA, CAAC and Boeing approvals. Skytronics has expanded its capabilities to include Boeing flight controls, horizontal stabilizer trim actuators (HSTAs), trim tab actuators, flap transmissions and leading-edge actuators. Skytronics also manufactures, repairs, overhauls and sells ignition harnesses, alternators, regulators and ignition lead conduits that are used in general aviation.

The Skytronics acquisition further expands PSI’s reach into the aerospace market. Other PSI subsidiaries that serve the aerospace industry include Beaver Aerospace & Defense, Sciaky, Inc., Mountain Secure Systems, Evana Automation Specialists and PSI Repair Services.

“The aerospace industry is very significant to PSI,” said Scott Phillips, CEO and President of Phillips Service Industries, Inc. “The Skytronics acquisition provides additional products and services to our valued customers.”

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Many Small Defense Related M&A Ongoing

One of the events waiting to happen as the U.S. restructures its defense budget is whether there will be a merger of two of the big U.S. contractors. Northrop Grumman’s (NOC) plan to get out of the shipbuilding business has led to rumors that it would then merge with Boeing (BA) or somebody else. In the Nineties when the last major downturn in spending occurred there was a rapid reduction in the number of defense contractors as Boeing, Northrop and Lockheed Martin (LMT) absorbed medium sized companies such as Grumman and Logicon.

Even though there has been no major M&A such as this many smaller deals continue as companies acquire capabilities to enhance their competitiveness in selected defense markets or expand into new areas. The potential focus on intelligence and services has already seen a great deal of activity.

For example Kratos Defense and Security Solutions (KTOS) is looking at merging with Henry Brothers Electronics (HBE) that would expand Kratos business line into access control and enhance its surveillance and security systems. Kratos is just one of multiple suitors for HBE and this all cash deal is worth over $45 million.

AbelConn and Photo Etch recently announced plans to merge. These two small companies provide component development and production for aerospace corporations. The merger will allow the two to expand their capabilities in design and production helping to maximize efficiencies and marketing. This kind of merger may become more common if the U.S. production of aircraft continues to decline minimizing business opportunities for sub-contractors.

These kind of deals will continue to be common as large companies target new technologies or business areas to make up for any reduction in their traditional work. Smaller companies will also look to each other to counter potential loss of business.

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Potential Sale of Northrop’s Ship Yards Signal First Major Shakeup of U.S. Defense Contractors

On Friday Northrop Grumman (NOC) one of the biggest U.S. defense contractors filed paperwork with the Securities Exchange Commission (SEC) that lays the ground for selling their shipbuilding assets. As early as June the company had said that they were considering this move.

As we wrote several weeks ago the U.S. Navy is looking at a severe reduction in planned ships and ship construction:

“With the pressures on the defense budget caused by the fighting in Iraq and Afghanistan for the last nine years as well as the high cost of new ships the number of orders each year has been reduced. On top of that the Obama Administration canceled or restructured planned programs by ending the DDG-1000 and substituting current DDG-51 class ships as well as ending a plan to have two designs produced for the new Littoral Combat Ship (LCS) and have a competition.”

So far at least one company, Cleveland Ship, has said that they intend to purchase Northrop’s yards. There are also reports that several private equity companies are exploring the purchase. Many smaller defense contractors or parts of larger ones have recently been purchased by equity companies including the sale of Northrop’s SETA arm, TASC, to one in 2009.

There have been rumors that the then smaller Northrop would consider a merger with Boeing (BA) to maximize the similar product lines and capabilities.

In the Nineties as the defense budget declined due to the “Peace Dividend” there was major contractions in the number of defense contractors mainly through M&A activity. The expected decline in the next decade will have the same effect as the number of programs and contracts decline.

Northrop’s ship yards in Louisiana and Virginia make aircraft carriers, destroyers and amphibious war ships. The Newport News facility is the only place that aircraft carriers are made as well as doing major refit work on them. Its operation is critical to the support of the U.S. Navy which is built around these ships.

The yards are also major employers for these states and their closing or reduction would be severe blows to the local economy. Keeping them open and working is critical to not only the industrial base but also the economy during a recession.

Unfortunately the Department of Defense is looking at improving efficiencies in their defense contracting. Keeping sites open just to have jobs is inefficient and costly. This may mean money for other programs may have to be used to maintain this industrial base capability. The balancing act will only get harder as defense budgets decline.

The U.S. may be entering a time when it cannot afford or build enough ships to support its current industry and while ship construction is first it may spread to other sectors of the defense economy such as aerospace and vehicle development and production.

Any loss of industrial base this time around will be expensive and time consuming to recover when the U.S. is facing economic and budgetary difficulties.

Photo from cybaea’s flickr photostream.

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BAE Systems Looks to Sell Chunk of U.S. Subsidiary

Since 9/11 and with the engagements in Iraq and Afghanistan the U.S. defense budgets has increased dramatically. Due to this increase in spending as well as the reduction in the domestic industrial base since the end of the Cold War the large European defense contractors entered the U.S. market. Now that those commitments are winding down and concerns about the size of the deficit and government spending in general may cause the defense budget to shrink some are rethinking their commitment to this market.

Both BAE Systems (BAE:LSE) and EADS (EADS:P) entered the U.S. market by setting up subsidiaries and acquiring American defense contractors. These moves were seen as a simple way around the security and technology transfer requirements. BAE especially established itself as a maker and support contractor for military vehicles heavily used by the Army and Marine Corps. Now there are reports that BAE will look to sell part of its U.S. operations.

A few years ago BAE purchased Armor Holdings as a way to expand their vehicle and armor production. BAE has made a great deal of money making Mine Resistant Ambush Protected (MRAP) vehicles for the American military as well as armor plate used by other companies. Unfortunately Armor Holdings biggest contract was to make the FMTV truck and that contract was lost to Oshkosh (OSK) in 2008. BAE is now missing a great deal of the revenue that Armor Holdings move promised.

Supposedly BAE will look to sell its platform solutions group. This business group provides products that is “serving the defence and aerospace communities with capabilities and products that improve operational safety and enhance mission effectiveness.”

Certainly there has been much discussion over the last few months as it becomes clear the defense budget will take some hits that there will be consolidation and mergers within the defense industry. By selling this group BAE raises capital to buy other companies that will help them focus on certain core capabilities or expand into new markets. Other companies may be willing to buy the group for the same reason.

If this does happen it will be a sure sign that many see little or no future expansion in the U.S. defense industry and their might be another round of consolidation as happened in the 1990’s. There are already rumors of Boeing (BA) merging with Northrop Grumman (NOC) for example.

These kind of signs and rumors indicate it might be a rough few years for the defense industry and their stocks as this is all sorted out.

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Comtech Deal to Acquire CPI Ends

In July we wrote about the U.S. Army awarding its next increment of the Blue Force Tracking (BFT) contract to ViaSat. One of the losing contenders was Comtech Telecommunications (CMTL).

BFT is a system of terminals, radios and datalinks that allow units to track the position of other friendly units. The goal of the system is to avoid friendly fire incidents that proved such an issue in Desert Storm. Northrop Grumman (NOC) is the prime contractor for BFT with ViaSat winning a contract to build parts of the system.

The loss of the contest for this contract was a major blow for Comtech and its stock price suffered accordingly. This then put pressure on the planned acquisition of CPI International for over $470 million. This deal was heavily based on CPI International shareholders receiving Comtech stock. The fall in price of shares affected how much money would be transferred.

Now in part due to the loss of the BFT contract Comtech announced that the deal has been terminated by mutual agreement.

At a time when M&A within the defense industry is supposed to pick up this illustrates that not all deals will go through. Comtech certainly had good reason to acquire CPI as it would have increased their market share in a variety of products and also expand their customer base. Unfortunately the two companies could not negotiate a deal based on the current status of Comtech’s stock.

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Defense M&A in Electro Optics Industry

Two acquisitions were announced recently that involve companies designing and making electro-optic systems and software for the defense market. They indicate that the continued investment by the United States, its Allies and other nations around the world into these systems are expected to continue and provide a market for contractors. This as there are now persistent worries that the U.S. and European defense budgets will start declining in the near future.

First BAE Systems (BAE: LSE) announced that they will be acquiring New Hampshire’s Oasys Technology. The total price could be up to $55 million if all conditions are met. Oasys Technology provides engineering services and research to support development of new electro-optics system. By acquiring the company BAE acquires that expertise which should lead to better systems and advanced production capability.

BAE already makes thermal weapon sights in use by the United States, Canada and Australia. These go on weapon systems and vehicles. Last week BAE received an order worth $123 million as part of a five year contract with the U.S. Army. This brings the total value of sales to the U.S. to over $1 billion. BAE also makes thermal imaging and infra-red cameras that may be integrated by other companies.

It was also announced FLIR Systems (FLIR) will acquire ICx Technologies. FLIR as their name implies makes Forward Looking Infra Red (FLIR) and other electro-optical sensor systems for use by military, security and civil customers. ICx will cost the company about $270 million. ICx manufactures sensors and equipment used in a variety of applications. These include those used to detect explosives that have homeland security uses. ICx also designs and builds radar equipment.

These two transactions show that there are opportunities for larger defense contractors to acquire companies that will expand their own product line. These two moves will aid BAE Systems and FLIR in developing more advanced systems and allow them to grow their share of a growing market for advanced optics, sensors and electronic surveillance systems.

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TransDigm Completes Acquisition of Semco Instruments Inc. — Press Release

September 6, 2010 by · Comment
Filed under: Acquisitions, Business Line, Companies, Events, Press Releases 

TransDigm Completes Acquisition of Semco Instruments Inc.

CLEVELAND, Sept. 3 /PRNewswire-FirstCall/ — TransDigm Group Incorporated (NYSE:TDG) , a leading global designer, producer and supplier of highly engineered aircraft components, today announced that it has completed the acquisition of Semco Instruments Inc. (Semco) for approximately $74 million in cash that was previously announced on August 6, 2010.

Semco, which is based in Valencia, CA, manufactures proprietary, highly engineered components for all major turbo-prop, turbo-fan, and turbo-shaft engines manufactured by Pratt Whitney, Honeywell, and General Electric, among others. Semco products are primarily used on helicopters, business jets and selected regional airplanes. Semco had annual revenues for calendar year 2009 of approximately $38 million, with significant aftermarket content.

About TransDigm Group

TransDigm Group, through its wholly-owned subsidiaries, is a leading global designer, producer and supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft in service today. Major product offerings, substantially all of which are ultimately provided to end-users in the aerospace industry, include mechanical/ electromechanical actuators and controls, ignition systems and components, gear pumps, specialized valves, engineered connectors, power conditioning devices, specialized fluorescent lighting, specialized AC/DC electric motors, aircraft audio systems, engineered latches and cockpit security devices, lavatory hardware and components, hold open rods and locking devices, specialized cockpit displays, elastomers, NiCad batteries/chargers, and starter generators and related components.

Source: TransDigm Group Incorporated

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