Rapid Fire 2011-12-05: Japan’s ATD-X Stealth Fighter

• The Pentagon is considering updating Defense Federal Acquisition Regulation Supplement (DFARS) to incorporate a “proposal adequacy checklist” for proposals in response to solicitations that require submission of certified cost or pricing data. Comments should be sent to DoD in writing before January 31, 2012, to be considered in the formation of the final rule.

• Switzerland’s largest socialist party (SPS) passes a resolution saying that they’ll try to stop the deal for 22 Swedish JAS-39 Gripen fighters. We aren’t surprised, either.

• Photos of a Japanese ATD-X stealth fighter mock-up. Which seems to be re-using a Mitsubishi F1 canopy. Still waiting for cool transforming robots…

Force Protection’s MRAPs to Stalk Mines on the Battlefield

Cougar 6×6, IEDed
- the crew lived.

The Cougar family of medium-sized blast-protected vehicles is produced in both 4-wheel (formerly Cougar H) and 6-wheel (formerly Cougar HE) layouts. Eventually, the wisdom of using survivable vehicles in a theater where land mines were the #1 threat became clearer, and these vehicles have gradually shifted from dedicated engineer and Explosives Ordnance Disposal (EOD) roles to patrol and route-proving/ convoy lead functions as well. Related variants and blast-resistant designs are also produced in response to country-specific requirements (Wolfhound, Mastiff, Ridgeback, ILAV Badger) and other designs cover different operational needs (Buffalo mine-clearance, Cheetah, Ocelot, and JAMMA patrol vehicles). To date, the firm has received orders from Britain, Canada, France, Hungary, Italy, Iraq, and Yemen; and Poland operates some on loan from the USA. Front line testimonials offer evidence of their effectiveness.

Cougar orders predate the USA’s MRAP program to rush mine-resistant vehicles to the front lines; indeed, the performance of Force Protection’s vehicles on the front lines was probably the #1 trigger for the MRAP program’s existence. This FOCUS article describes Force Protection’s vehicles and corporate performance, which became an issue in recent years. It also covers key events and procurements around the world related to Force Protection’s Cougar (MRAP CAT I & II), Buffalo (MRAP CAT III), and related blast-resistant vehicle families.

With the acquisition of Force Protection by General Dynamics, future purchases will be covered under “General Dynamics MRAPs: Partners and Purchases.”

German Shipbuilding Restructured: UAE’s Firm Buys Blohm+Voss

Sachsen, sending SM-2

In October 2009, ThyssenKrupp Marine Systems (TKMS) effectively sold most of its naval and commercial surface shipbuilding assets, via a “close strategic partnership” and Memorandum of Understanding with the Abu Dhabi MAR (ADM) group in the United Arab Emirates. The proposed sale followed related purchases in Germany by Abu Dhabi MAR, and other recent shipyard sales by TKMS. The net effect was a restructuring of Germany’s naval shipbuilding industry.

The envisioned agreement involved a 50/50 joint venture to build naval surface ships, with TKMS retaining a lead role and know-how in all projects with the German Navy and NATO partners, while ADM was responsible for the Middle East and North Africa. At the same time, however, Abu Dhabi MAR would acquiring 80% of TKMS’ key surface ship firms: Blohm + Voss Shipyards, Blohm + Voss Repair, and Blohm + Voss Industries. That deal has largely fallen through in 2011, leaving TKMS naval assets in play again.

Rapid Fire Evening 2011-06-14: FY12 Appropriations

• The House Appropriations Committee approves the FY12 Defense Appropriations legislation. The bill contains $530 billion in non-emergency funding, an increase of $17 billion over last year’s level, but $9 billion below President Obama’s request. The Committee also agreed to withhold 75% of the $1.1 billion-worth of aid for Pakistan, until the administration reports on how it would spend the money. It isn’t a budget, however, until Senate reconciliation happens.

Rapid Fire Evening 2011-06-06: Armored Vehicle Protection

• The latest companiesandmarkets.com report predicts that the global aerospace and defense sector will achieve revenues of $399 billion by 2015. While the United States will retain its position as the largest aerospace and defense market, the Asia-Pacific region will experience the fastest growth during the reporting period.

• The head of the French Navy tells The Telegraph that he was ‘stunned’ by the Royal Navy’s decision to axe its aircraft carriers and Harrier jump jets.

• Almost three months after RAFAEL’s ASPROA-/Trophy active protection system was used to intercept an anti-tank missile fired at an IDF tank in the Gaza Strip, reports suggest that the U.S. military is close to combining two active protection systems into a single defense for armored vehicles in Afghanistan.

• Turkey is reportedly nearing agreement on a limited sale, within its Dec 3/09 DSCA request for up to 14 CH-47F Chinook heavy-lift helicopters.

• South Korea has placed its 2nd KDX-III AEGIS destroyer, ROKS Yuglok Yi I, into operational service.

• Aéro Montréal, Québec’s aerospace cluster, launches the MACH initiative to help companies improve their performance and better position themselves in future aircraft program supply chains.

• Tognum AG welcomes Engine Holding GmbH, the joint venture between Daimler AG and Rolls-Royce Holding plc, as the new majority shareholder in the engine manufacturer.

• Rosvertol, the attack helicopter arm of Russian Helicopters, says it is in talks with Algeria concerning an export deal for its night-capable Mi-28NE.

Elbit Turns Initial Mikal Stake Into Targeted Acquisitions

Latest updates[?]: African sale for ATMOS howitzers.

In June 2009, Elbit Systems in Haifa, Israel, agreed to pay $18 million for a 19% stake in fellow Israeli defense firm Mikal Ltd., the country’s 2nd largest privately owned defense conglomerate. The Mikal group operates through 3 main divisions: Soltam Systems, which supplies artillery, mortars, and ammunition; Saymar, which supplies armored fighting vehicles; and ITL Optronics, which supplies sensors for soldiers, unmanned aerial vehicles, military vehicles and battle management systems.

By August 2010, however, the acquisition had shifted to a targeted buy of several Mikal properties. The move will consolidate Elbit’s position in a number of sectors, offering the prospect of close links between its sensors, targeting systems, UAVs, and front-line battlefield platforms.

EADS Solidifies MRO Position with Vector Acquisition

A week after the March 2011 revelation that EADS was in discussions with Toronto Stock Exchange listed Vector Aerospace, a support agreement with EADS subsidiary Eurocopter Holding will acquire all of Vector’s issued and outstanding common shares for consideration of C$ 13 ($12.95) per share, valuing the firm at about C$ 625 million. The offer price is 15% above the closing price when trading was halted, and 80% above the price on Dec 31/10, when the firm publicly announced that it was open to merger offers.

Therein hangs a pair of tales – one concerning the buyer’s rationale, and another concerning the takeover saga itself. The EADS acquisition was actually the indirect product of a failed internal takeover bid in 2009…

Sector Outperforms: Grant Thornton Lookback on Defense M&A 2009

Guest Article by Ian Cookson

If 2008 can be characterized as a year in which private equity buyers battled to acquire aircraft component manufacturers, then 2009 was a time of strategic acquirers fighting to secure defense technologies.

2009 was a relatively strong year for mergers and acquisitions. Defense technology saw a 6% increase in M&A activity in 2009 with a particularly strong second half of the year. This contrasts with M&A activity as a whole, which showed a 9% decline in the number of U.S. transactions across all sectors. M&A activity is likely to continue as the DoD, shaped by the 2010 QDR, shifts away from “big iron” and focuses on high-demand, low density assets such as unmanned aircraft, cyber security, and Command, Control, Communication, intelligence, Surveillance and Reconnaissance (C3ISR) technology. Defense contractors and government IT providers, mirroring these shifts in spending priorities, are actively looking to acquisitions to enhance their capabilities. Earnings for our defense IT company index rose 8% (EBITDA) during the year, and defense electronics company earnings rose 5%…

Cerberus to Buy Dyncorp

Private investment firm Cerberus Capital Management, LP has reached a $1.5 billion deal to buy the support and security contractor DynCorp International, including the assumption of debt. The purchase price would be $17.55 per share – a 49% premium to the April 9/10 close of $11.75, and 12.4x the FY 2010 consensus forecast of $1.41 earnings per share. A “go shop” provision gives DynCorp 28 days to find a higher and better offer, if it can.

Affiliates of Veritas Capital Fund Management, L.L.C. have already executed a Voting Agreement in favor, swinging an aggregate of 34.9% of the outstanding shares. That level of support will make the deal very difficult to stop.

Note that 12.4x is still a low multiple, when compared to a number of more diversified public competitors like KBR and SAIC. Unfortunately, it’s difficult to compare DynCorp with privately-held security contractor peers like the similarly-controversial Xe (formerly Blackwater), IAP Worldwide Services, Triple Canopy, etc. The result is somewhat predictable…

BAE Systems Selling Stake in Sweden’s Saab

In 1998, with a global sales partnership in place for Saab’s JAS-39 Gripen fighter, BAE bought a 35% stake in Saab for 3.5 billion Swedish kronor. In March 2010, a month after BAE Systems settled bribery cases with the US and Britain over weapons sales that included Gripen fighters, Britain is divesting just over half of its remaining stake in the Swedish defense firm, for SEK 1.07 billion (about $150 million). Saab’s best-known product is its JAS-39 Gripen lightweight fighter, but the firm offers a diverse array of defense products that include radars, missiles, UUVs, and more.

BAE had already reduced its stake in Saab to 20.5% in 2005, and was not involved in recent efforts to sell the Gripen to Switzerland and Brazil. The firm reportedly intends to dispose of all Saab holdings…