Sponsored by Odyssey Corporate Finance
Contact: Tom McCarthy, Director, Odyssey Corporate Finance
M: 07867 459 600
D: 0121 503 2375
30 Nov 18. General Dynamics European Land Systems (GDELS) announced today the acquisition of FWW Fahrzeugwerk GmbH, a qualified maintenance and service provider for the German Army and other international customers. FWW will become part of
the newly-established General Dynamics European Land Systems – Deutschland, located in Berlin
“The acquisition of FWW represents a significant step in expanding General Dynamics’ footprint, capability and customer offerings in Germany. This acquisition is also a further step in our growth strategy to position GDELS as one of the leading land systems providers in Europe” said Alfonso Ramonet, President of General Dynamics European Land Systems.
“FWW has a wide range of services, enabling GDELS to further expand its current customer service portfolio, enter new markets and reinforce the company’s position in Germany,” said
Thomas Kauffmann, GDELS Vice President and Managing Director, GDELS-Deutschland. “Under the umbrella of GDELS-Deutschland, FWW together with GDELS-Bridge Systems will employ around 600 highly skilled employees, demonstrating General Dynamics’ strong
commitment to our German customer.”
“We believe the company’s acquisition by GDELS represents an excellent outcome withgreat future potential for FWW, its employees and customers,” said Thomas Bockhold, CEO and owner of FWW. “It was key for us to find a trustful and reliable partner, who will secure and grow the company and will remain committed to the region of Mecklenburg Vorpommern,” Bockhold said. “It builds on our strong values and passion for exceeding our customer’s expectations and I am confident that the combination of the two companies will create a strong and reliable service provider for the German Army.”
29 Nov 18. Parrot Cuts More Jobs as Sales Nose-Dive. French drone specialist Parrot said Friday that it would cut around 100 jobs after its third-quarter sales slumped by 40 percent, putting a major dent in its revival plans. Parrot helped create the market for mass-market quadcopters in the late 2000s with easy-to-fly devices that won over millions of fans worldwide. But since then it has been outpaced by China’s DJI, which now has a 70-percent share of the market. Revenue fell 40 percent compared with the same period last year to 23.4m euros ($26.6m), dragged down by a 45 percent plunge in its commercial drone business. The net loss in the third quarter deepened to 52m euros after the 14m posted in the same quarter last year. The company had high hopes for the new Anafi model launched this year, its first folding drone capable of shooting high-resolution 4K video, but reviews for the 550-euro device have been mixed. Drones for professionals, used in agriculture, construction, surveillance and other industries, garnered sales of 9.3m euros, up 4 percent from the same period last year.
The company said it would dismiss around 100 of the 658 workers it currently employs, after cutting nearly 300 jobs last year.
“The end of this year is being complicated by a significant and unexpected contraction of the consumer drone market,” chief executive Henri Seydoux said in a statement.
Looking ahead Parrot forecast a further “significant contraction” for its commercial drone business. The group’s shares plunged on the Paris stock exchange Friday, losing half their value to stand at 1.76 euros in afternoon trading. (Source: UAS VISION/France 24)
BATTLESPACE Comment: Another announcement of loses and job losses in the fledgling UAV market. Billions of private equity money has bene ploughed into the UAV and drone market with the promise of huge sales and profits. Sales appeared to have plateaued due to safety and spectrum concerns. Expect more of the same over the coming months with the ultimate consolidation of the industry.
29 Nov 18. France’s Safran aims to topple U.S. rival as no.1 aerospace supplier. Safran (SAF.PA) unveiled ambitions to become the world’s leading aerospace supplier in 15 years, overtaking United Technologies (UTX.N), as it pledged a research and development (R&D) spending drive while increasing cash returns to shareholders. The French aerospace engine and equipment supplier added that it did not plan major new acquisitions after buying Zodiac Aerospace to become, according to its calculations, the world’s second-largest aerospace supplier behind United Technologies.
“The priority will focus on organic development,” it said in a statement ahead of a capital markets presentation.
The event comes days after conglomerate United Technologies completed its acquisition of Rockwell Collins and announced plans to split itself into three by 2020.
Safran, which co-produces engines for narrowbody jets with General Electric (GE.N), said it was gearing up for a new cycle of research and development (R&D) partly driven by a new mid-market jet being studied by Boeing (BA.N), depending on whether it goes ahead.
It also pledged “targeted” R&D efforts at Zodiac and a 30 percent increase in broader research and technology spending as it laid out plans for better propulsion aircraft with more electrics and connected cabins, and wider use of 3D printing.
It predicted like-for-like revenue percentage growth in mid-single digits over 2019-2022 and a recurring operating margin “trending to a 16-18 percent range” by 2022 after the engine model switch and the recovery of Zodiac’s interiors business.
Safran made a 14.6 percent margin in the first half.
The company plans to invest in more maintenance and repair activities as it relies more heavily on power-by-the-hour contracts for its new ‘LEAP’ engine, underpinning a forecast of high single-digit growth in civil aftermarket sales in 2018-22.
Safran said it was accelerating the operational recovery of Zodiac Aerospace from the repeated production problems that forced it into Safran’s arms earlier this year.
It confirmed a goal of 200m euros (177.26m pounds) of annual pre-tax cost savings from the merger by 2022 and said “further upside has been identified”. (Source: Reuters)
BATTLESPACE Comment: This move by Safran to take on UTC is good news for Melrose in particular as it gives it a natural home for its GKN Aerospace business at a time when it is struggling to unload other assets. UTC would also be interested in the unit which may spark a bidding war.
28 Nov 18. Senior says on course to make “good progress” in 2018, aided by aerospace division. Senior’s aerospace division is benefitting from newer programmes such as the 737 MAX, A320neo and A350. Senior said trading at its Flexonics division was meeting expectations. Senior PLC (LON:SNR) said Wednesday positive activity in its aerospace division and cost-saving efforts are keeping it on track to make “good progress” this year. The FTSE 250-listed aerospace and automobile engineering group said in a trading update that its aerospace division has been benefitting from activity in the large commercial aircraft sector as production ramps up on newer programmes such as the 737 MAX, A320neo and A350. Related investment activity will continue into the first half of 2019, the company said.
Trading in its Flexonics Division was meeting expectations, aided by growth in the truck, off-highway and upstream oil and gas markets that’s been partially offset by an anticipated decline in the passenger vehicle market.
“Overall, at current exchange rates, and consistent with the position set out in the Interim Results announcement of 30 July 2018, the Board expects good progress to be made in 2018,” said Senior in a statement.
“Looking further ahead, whilst we continue to invest in new programmes and products, Senior expects to make progress as these programmes ramp up, as new facilities commence operations, and as the benefits of the implementation of the Senior Operating System and cost-saving actions continue to be delivered,” it said. (Source: proactiveinvestors.co.uk)
28 Nov 18. Patriot One to acquire video threat recognition software firm EhEye. Canadian company Patriot One Technologies has agreed to acquire video threat recognition software firm EhEye. Under the definitive acquisition agreement, Patriot One will purchase 100% equity interest in EhEye in consideration of the issuance of 1,636,363 common shares of Patriot One to the existing shareholders of EhEye. The transaction will see EhEye’s video threat recognition software join Patriot One’s PATSCAN covert weapon detection system. The video threat recognition sensors automate the detection of weapons, disturbances and suspicious behaviours through existing camera infrastructure. The technology integrates computer vision techniques with machine learning for artifact recognition in order to employ deep learning architecture to alert security teams about abnormalities that a standard video system cannot identify.
Patriot One Technologies chief executive officer and president Martin Cronin said: “We are very pleased to welcome the EhEye team into the Patriot One family. Their award-winning threat recognition software will integrate into our client’s existing video camera networks offering a first line of defence to detect active shooters or terrorists approaching a venue with weapons drawn. It will also offer an additional layer of detection inside buildings to track threats and even identify irregular disturbances or physical altercations between individuals.”
Currently, the video recognition sensor technology is in its late stage of pilot testing. The solution is an artificial intelligence-based system that has been developed to improve weapon detection, disturbance recognition and ongoing accuracy once deployed.
Patriot One intends to begin commercial deployment of the PATSCAN VRS system to select customer sites followed by distribution to its security system integrator network in the first quarter of next year.
The transaction is subject to a number of standard closing conditions, including any required approvals of the TSX Venture Exchange. (Source: army-technology.com)
28 Nov 18. Terra Drone Acquires Skeye. Terra Drone Ltd, a global company with its headquarters in Japan, has acquired a majority stake in the leading European drone service provider Skeye. Skeye will become the European headquarters of Terra Drone. With this acquisition Terra Drone has become one of the largest drone service company with more than 250 employees and presence in all continents. Terra Drone Ltd serves its clients with safer, better and more efficient surveys and inspections by using and developing cutting-edge technologies in the fields of unmanned aerial vehicles, better known as drones. Skeye is an aerial survey and inspection company with a focus on drones in the oil and gas market, and with its headquarters in the Netherlands, and offices in the United Kingdom and Belgium.
Toru Tokushige, CEO of Terra Drone explains the reason for the acquisition: ‘We have had discussions with many drone operators in Europe but were especially impressed with the track record and professionalism of Skeye. Skeye has an excellent track record and vast professional experience in the on- and offshore oil and gas market, in both inspections and 3D surveys using drones. We consider Skeye to be the best partner to bring our technologies to the European and African market’.
Pieter Franken, managing director of Skeye adds: ‘Terra Drone will bring a wealth of new technologies and a global network that we can use to better serve our international clients. This will ensure we can keep on providing our customers with the most cutting-edge technologies, now and in the future. The TerraUTM operating platform, 4G capabilities for guiding drones over large distances, inhouse developed Terra-LiDAR, smart learning inspection software, and their proprietary mapping software Terra-Mapper are but a few of examples of technologies that this partnership will bring”. (Source: UAS VISION)
27 Nov 18. Amphenol Corporation Announces Definitive Agreement to Acquire SSI Controls Technologies. Amphenol Corporation (NYSE: APH) announced today that it has entered into a definitive agreement to acquire SSI Controls Technologies (“SSI”), the sensor manufacturing division of SSI Technologies, Inc., for approximately $400m (subject to customary closing adjustments) plus a performance-related contingent payment. The transaction is subject to certain regulatory approvals and other customary closing conditions and is expected to close by early 2019.
SSI is a leading designer and manufacturer of sensors and sensing solutions for the global automotive and industrial markets, with annual sales of approximately $180m. Headquartered in Janesville, Wisconsin, SSI operates manufacturing facilities in Wisconsin, USA, as well as in the Czech Republic, and employs approximately 900 people worldwide.
“We are extremely pleased to announce this agreement to add SSI to the Amphenol family,” said R. Adam Norwitt, Amphenol’s President and CEO. “We believe that SSI’s product offerings are uniquely complementary to our existing offerings and represent a significant long-term growth opportunity driven by the expansion of electronics across a broad set of applications in the automotive and industrial markets. We look forward to working in partnership with SSI’s experienced management team to deliver additional high technology solutions to our customers.”
“Consistent with our acquisition strategy and assuming a continuation of current economic conditions, we expect the SSI acquisition to be accretive to earnings per share in the first year post acquisition.”
Amphenol will provide further information regarding the acquisition at its regularly scheduled quarterly earnings call to discuss Fourth Quarter earnings scheduled for January 23, 2019. (Source: BUSINESS WIRE)
27 Nov 18. Tank maker takeover: Germany’s Rheinmetall eyes acquisition of rival KMW. German armored vehicles-maker Rheinmetall has confirmed initial talks about an acquisition of its rival Krauss-Maffei Wegmann, a move that would reorder the industry landscape involved in producing a new European main battle tank. According to a brief Rheinmetall statement, on the table is the takeover of KMW in the context of its partnership with French tank maker Nexter, known under the name KNDS. KMW and Nexter each own 50 percent of their Franco-German joint venture.
KNDS and Rheinmetall were expected to pitch separate design proposals next year for the Main Ground Combat System, a novel tank meant as one of three signature military projects propelling the Berlin-Paris defense partnership. It remains to be seen how the dynamic of a KMW acquisition by Rheinmetall would play into those plans.
Citing industry experts, the newspaper Die Welt on Tuesday wrote that the French government, through state-owned Nexter’s deal with KMW, is expected to have a say in the transaction. Paris may even have a right of first refusal for KMW’s portion in KNDS, the newspaper reported.
Rheinmetall’s statement on Monday noted that a final decision regarding the way ahead depends on a “multitude of political, economic and regulatory” aspects still to be sorted out.
A takeover deal could put to rest the question of what vehicles German defense companies will pitch for multibillion-dollar modernization programs of the U.S. ground services. Rheinmetall is already offering the Lynx armored fighting vehicle as a Bradley replacement. KMW could make another attempt at selling the Puma vehicle, though Rheinmetall is also part of the joint venture producing that vehicle for the German forces. (Source: Defense News)
26 Nov 18. United Technologies to separate into three companies. United Technologies Corp (UTX.N) said on Monday it would separate into three companies consisting of its aerospace, elevators and building divisions, making it the latest industrial conglomerate to pursue such a break-up.
The decision follows the completion this month of United Technologies’ $30bn acquisition of avionics maker Rockwell Collins, which gave enough scale to its aerospace business to be a standalone company.
The move is in line with plans of other major industrial companies, such as DowDuPont Inc (DWDP.N), Honeywell International Inc (HON.N) and General Electric Co (GE.N), to shed major divisions, as investors assign more value to the parts of these companies separately than to their sum.
Two activist hedge funds, Daniel Loeb’s firm Third Point LLC and William Ackman’s Pershing Square Capital Management LP, had called on United Technologies to pursue a split, and United Technology’s chief executive, Gregory Hayes, had signaled for most of the past year that he was considering the move.
“Our decision to separate United Technologies is a pivotal moment in our history and will best position each independent company to drive sustained growth,” Hayes said in a statement.
United Technologies shares were up 2.2 percent at $130.81 in extended trading in New York on Monday. With a market capitalization of $102.5bn, United Technologies is one of the biggest companies ever to pursue a three-way split.
United Technologies said it planned to keep the newly acquired Rockwell Collins business, along with its Pratt and Whitney engines unit and aerospace systems. This combine business generated total sales of $39bn in 2017 on a pro forma basis.
United Technologies said it will spin off its Otis elevators and Carrier air-conditioning businesses tax-free to shareholders.
Otis reported sales of $12.3bn last year, while the Carrier unit had revenues of $17.8bn.
Hayes will continue in his current role as United Technologies chairman and CEO after the separation, the company said, with the separation expected to be completed by 2020.
United Technologies raised its 2018 sales forecast on Monday to a range of $64.5 bn to $65.0 bn, up from $64.0 bn to $64.5 bn previously, to include the Rockwell Collins acquisition.
The company expects 2018 adjusted earnings per share of between $7.10 and $7.20, down from $7.20 and $7.30 earlier. (Source: Reuters)
26 Nov 18. Melrose considers shelving sale of GKN division after receiving low-ball bids, says report. RB Capital said Melrose is strict on asset valuation and is unlikely to sell if uncertain market conditions have weighed on bids for GKN Powder Powder Metallurgy
Melrose Industries PLC (LON:MRO), which bought GKN in a £8bn hostile takeover this year, is reportedly considering whether to shelve the sale of the engineer’s powder metallurgy unit after receiving a string of “low-ball” offers.
According to Sky News, last week Melrose received initial bids for GKN Powder Metallurgy that value the business at about £1.6bn, below analysts’ expectations of £2.0bn.
Shares fell 5.5% to 171.70p in morning trading.
Sky said Apollo and PAI Partners were among the private equity firms that approached Melrose with offers last week.
The lower-than-expected bids have raised the prospect that Melrose may halt a planned immediate auction of the division.
“They will sell the business, but it may not be through this particular auction,” a person close to Melrose told Sky.
Melrose had said at the time of its acquisition of GKN that it was “exploring strategic options” for the powder metallurgy arm as it wanted to focus on the aerospace and automotive divisions in the longer term.
Jefferies and Rothschild are advising on the sale of the division, which makes high-performance components for automotive and industrial applications.
RBC Capital thinks £1.8bn offer ‘acceptable’
Analysts at RBC Capital said: “Melrose management is strict on asset valuation and is unlikely to sell if current slightly more uncertain market conditions have weighed on bids for Powder Met.
“However, at this point, this is not a management-confirmed story, and we believe that if bids of £1.8bn+ were to be received that would be acceptable (vs £2bn in analyst forecasts referenced by the Sky News article). Our SOTP assumes a £1.8bn valuation. We would note that the £0.2bn differential versus our SOTP is only circa 2% on group valuation.”
RBC said the focus of the GKN deal remains on significant business improvement over the next three to five years. The broker sees improvement opportunities across the group, including at Powder Met where it expects margins to rise by 300 basis points through to 2022.
Melrose’s hostile takeover of GKN was approved by shareholders in March.
The turnaround specialist agreed to a number of pledges for its acquisition of GKN to soothe concerns raised by business secretary Greg Clark about the future of the engineer.
The commitments included not selling the aerospace division for five years, maintaining the GKN’s London listing, keeping the UK headquarters and ensuring research and development spending was at least 2.2% of sales. (Source: proactiveinvestors.co.uk)
BATTLESPACE Comment: Historically one deal heralds the end of a Bull market and it looks very much as if Melrose’s audacious bid for GKN called the top of the market. The failure to obtain top dollar for the Powder metallurgy business comes as little surprise to observers given the reported quality problems of certain of the product and general automotive market conditions. Given the promises made on the aerospace division and the current poor automotive market highlighted by yesterday’s announcement by GM, the possibility of sales of any of the major GKN Divisions looks bleak.
25 Nov 18. Elbit Systems Completes the Acquisition of IMI Systems . Elbit Systems Ltd. (NASDAQ:ESLT and TASE: ESLT) (“Elbit Systems”) announced today that it completed the acquisition of IMI Systems Ltd. (“IMI”) for a purchase price of approximately $495m (NIS 1.8bn), with an additional payment of approximately $27m (NIS 100m) contingent upon IMI meeting agreed performance goals.
Bezhalel (Butzi) Machlis, Elbit Systems President & CEO, commented: “The synergy between the capabilities of the two companies and the global positioning of Elbit Systems will enable us to offer an enhanced portfolio and to realize the potential of the technologies of IMI in the international arena, making this acquisition significant to our long-term growth strategy.” Machlis added: “Elbit Systems has a proven track record of successfully performing major acquisitions, and I am convinced that this acquisition will be beneficial for Israel’s economy, for both companies’ employees and customers and for our shareholders.”
23 Nov 18. Interserve’s target price cut by Liberum on continued debt concerns. Liberum analysts are also concerned that Interserve has US$350mln of unhedged US private placement loans, which can put material pressure on its flagging shares. Interserve said it would unveil new debt reduction plans early next year. Interserve (LON:IRV) has had its target price cut by broker Liberum after the embattled outsourcer reported that its debt pile had grown in the last quarter and that its exit from the energy-from-waste sector was dragging on. The support services and construction group on Friday said it expects its year-end net debt to be in the range of £625mln-£650mln – up from £614.3mln at the end of June when it guided to a full-year net debt of between £575mln-£600m.
In a note to clients, analysts at Liberum increased their net debt forecast (net of £23mln discount) from £558mln to £618mln or £641mln gross of the discount.
“The energy from waste delay has resulted in a £7mln increase to net debt as a result of a penalty. There has also been an increase in receivables due to a weak collection on a Saudi education contract and at equipment rental,” Liberum analysts wrote, adding it is also worth remembering that Interserve has US$350mln of unhedged US private placement loans, which can put material pressure on the equity.
“We reduce our target price from 50p to 35p to reflect the higher debt but valuation is close to irrelevant given the financial risks,” the analysts added.
Interserve, which has been under severe pressure since the high profile collapse of Carillion, said it expected to make significant operating profit improvement in 2018.
The company, which has been hit by significant delays to a number of the energy from waste plants it is building in the UK, said construction of all the projects was now complete and are close to being handed over.
Analysts at Peel Hunt said ahead of a more detailed model review it anticipates maintaining its 2018 estimates for Interserve with a small reduction to 2019 forecasts.
Since Debbie White joined Interserve as CEO in September 2017 to turn the company around its share price has tumbled from around 170p to close to 35p today. Interserve shares were 4.6% down at 33.38p in mid-morning trade. (Source: proactiveinvestors.co.uk)
Odyssey is an independent corporate finance firm which advises on acquisitions, business sales, management buy-outs and raising finance, typically in the £5m to £100m range. We have extensive experience in the niche manufacturing sector with our most recent completed deal being the sale of MacNeillie to Babcock Plc. Details can be seen at: http://www.odysseycf.com/case-study-macneillie/
As a result of this and related projects we have developed relationships with buyers and funders looking to acquire or invest in the sector. We would be happy to share further insights into the sector and to carry out reviews of businesses whose shareholders are considering an exit, acquisition or fundraise.
The review will include:
* Market review
* Comparative deals and structures
* Initial thoughts on buyers/ investors/ targets
* MBO viability
* Feasibility review and identification of any issues to be addressed pre-deal
There is no charge for this review.
If this is of interest we would be happy to meet at your convenience.