11 Jul 19. Acorn Growth Companies Acquires Black Sage Technologies. Acorn Growth Companies, a private equity firm investing exclusively in aerospace, defense and intelligence, announced today the acquisition of Black Sage Technologies (Black Sage), the market leader in the development, integration and deployment of counter-unmanned aircraft systems (C-UAS) solutions, headquartered in Boise, Idaho.
As a leading developer of C-UAS solutions, Black Sage identifies, classifies, tracks and defeats UAS threats for military, government, law enforcement, and civil applications. Black Sage employs a hardware-agnostic approach to integrating best-of-breed sensors with its proprietary artificial intelligence-enabled target tracking and defense automation systems to provide adaptable, end-to-end C-UAS systems.
“The acquisition of Black Sage strengthens our already robust defense portfolio of businesses focused on protecting the interests of the United States and its allies,” said Rick Nagel, managing partner of Acorn Growth Companies. “Black Sage is truly ahead of its competition in this highly fragmented space, already delivering integrated identification and defeat services across the globe. We see significant growth potential for this market segment.”
Black Sage’s UASX-branded C-UAS systems have been successfully deployed in support of fixed-site security, critical infrastructure protection, and commercial event airspace monitoring. Black Sage’s customers include U.S. Government Agencies, the Department of Defense, U.S. Aerospace & Defense prime contractors and allied military and government customers in Europe, Middle East, and Asia.
“The depth and expertise of the Acorn Growth Companies team is impressive,” said Dave Romero, co-founder of Black Sage Technologies. “Acorn’s network and reputation combined with Black Sage’s technology and performance history is a powerful combination for delivering safety and security to a broader market.”
“As a technologist, having the additional financial resources and expertise of Acorn will be a force multiplier for Black Sage to further enable the rapid development of counter-UAS technologies that keep our world safer,” said Ross Lamm, Ph.D., co-founder of Black Sage Technologies.
Terms of the transaction were not disclosed.
About Black Sage
Black Sage is a fast-moving defense technology integrator specialized in autonomous airspace protection solutions to take down small remote piloted aircraft systems. With an ensemble of sensors, effectors and machine intelligence tools, Black Sage answers some of the most challenging counter-UAS mission requirements in critical infrastructure, internal security, and civil defense. Black Sage is dedicated to maintaining safety and security.
Acorn Growth Companies is a middle market private equity firm focused exclusively on Aerospace, Defense and Intelligence. Acorn invests solely in operating companies that strive to enhance global mobility and protect national interests. Acorn has a formidable reputation in the industry and is recognized for its deep understanding of the Aerospace & Defense markets, with proprietary access to the best companies within these sectors. With operational expertise and its ability to lead and manage investments through variable economic and industry cycles, Acorn works in tandem with management to build its portfolio companies into significant market leaders. (Source: BUSINESS WIRE)
11 Jul 19. Meggitt flies higher as Goldman tips it to beat forecasts this year. Goldman likes Meggitt’s exposure to the growing US defence market. Meggitt PLC (LON:MGGT) was one of the top risers on the FTSE 250 after heavyweight investment bank Goldman Sachs upped its recommendation for the aerospace and defence engineer to ‘buy’ from ‘neutral’. Alongside the rating upgrade, the Goldman analysts also hiked their price target by 12% to 662p, from 592p previously.
In a research report, the US bank said Meggitt is “well-positioned” to better market expectations over the next few years.
“With 80% of revenues originating from the Global Aerospace and US Defence markets, we believe Meggitt is one of the better positioned stocks in our sector to deliver profitable growth through the medium term,” said Goldman in the note to clients.
“In addition, we believe growth expectations for this year are too low: company-compiled consensus expects 4% revenue growth, we forecast 9%.”
The US market is a key one for defence contractors, and President Trump and his team have upped spending in this area by 13% over the last two years, which should bode well for Meggitt.
“Outlays (i.e. actual cash spending) usually lag budget hikes by 12-18 months and are currently up 26% year-to-date,” said Goldman.
“We expect Meggitt will benefit from an uptick in 2019 and beyond, and we model 8% organic revenue growth in defence this year vs. guidance for 3%-5%.”
As for the impact of Boeing cutting production of its 737MAX planes, the number crunchers acknowledge that “poses downside risks” to growth forecasts in 2019, although it should wash out as and when deliveries resume. Meggitt shares were up 2.2% to 540p to 538.4p on Thursday afternoon. (Source: proactiveinvestors.co.uk)
11 Jul 19. BATM armed for a re-rating. Shares in BATM Advanced Communications (BVC:43.5p), a provider of medical laboratory systems and cybersecurity and network solutions with extensive operations in Israel, started trading on the Tel Aviv Stock Exchange today, exactly 20 years after the company joined the Main List of the London Stock Exchange.
BATM will retain its primary London listing and shares on both the Tel Avi and London Stock Exchanges will be fully transferrable. Based on 438m shares in issue, BATM has a market capitalisation of £192m, so it expects to become a constituent of the TA-90 index which tracks the 90 shares with the highest market capitalisation that are not included in the TA-35 index.
The secondary listing will provide a local trading platform for the Israeli-based institutions that recently became shareholders after BATM raised $18m (£14.1m) in a placing at 42.5p a share at the end of June. It will also expand the accessibility of the shares to a wider pool of investors and increase the breadth and depth of the company’s shareholder base, with the aim of improving the liquidity and tradability of the shares. That can only be positive for BATM’s share price. It’s worth noting that the company raised $3m more than the $15m minimum amount it was seeking in the placing, highlighting strong investor demand.
Profit from network function virtualisation
That’s understandable given that the proceeds of the fundraise will be primarily used in BATM’s network and cyber security division to fund an acceleration of the network function virtualisation (NFV) ecosystem projects that BATM is developing in partnership with the world’s leading chip designer, Softbank-owned Arm Holdings, as the only worldwide software vendor to provide NFV functionality to Arm and Intel platforms.
The exciting partnership is developing infrastructure solutions for NFV, a technology that decouples the network functions, such as firewalling, intrusion detection and caching from proprietary hardware appliances, so they can run in software. The solution is being integrated into the products of major chip makers, including NXP Semiconductors (NSQ:NXPI), a US$31bn market capitalisation company listed on the New York Stock Exchange.
The technology could be a real money-spinner for both BATM and Arm holdings given that NFV is going to play a critical role in supporting the services 5G network operators will be able to offer. It can also be used to run applications such as autonomous vehicles. Moreover, network operators and virtualised network function providers will be able to deploy their applications and operate across all major hardware architectures, so leveraging the advancements in different processor technologies. BATM has conducted successful proof-of-concept trials with tier 1 and 2 telecom operators. The royalty stream from major network operators adopting the JDA’s technology could easily run into millions of dollars.
It’s also worth noting that BATM has already launched a new technology under its long-standing partnership with NXP to enable a significant increase in network traffic, without requiring an increase in computing power, when licensing the company’s NFVTime operating system on certain NXP processors built on Arm core technology. In addition, BATM has entered into a strategic technology partnership with Clavister (STO:CLAV), a Sweden-based network security vendor of high-performance cybersecurity solutions, to run its Arm-optimised virtualised cybersecurity platform on NFVTime.
Some of the funds raised from the placing will be used to complete development of BATM’s CyberGuard security product for NFV use cases. With a heavy weight partner in Arm Holdings on board, it goes without saying that BATM is strategically incredibly well-placed to benefit as network functions become increasingly virtualised.
Molecular diagnostics: a growth opportunity
The other major growth opportunity for BATM is in its molecular biology diagnostics joint venture business, Ador Diagnostics, a company that is developing a new molecular diagnostic bench-top analyser that is able to probe 100 targets in a single proprietary carbon array. Existing products only probe on average between four and six targets per test sample. It is being targeted at screening for hospital-acquired infections such as MRSA and C. Diff, and to identify tropical infections in travellers returning home with fevers.
Earlier this year, Ador secured a $30m (£24m) investment from new investors to provide the funding for the commercialisation of the product in 2020. The initial $14.5m investment was received in April which placed a an enterprise value of $44.5m on Ador, implying BATM’s retained 38.2 per cent stake in the joint venture is worth $17m. Moreover, a further $15.5m (at a valuation that will be 33.3 per cent higher than the current enterprise valuation) will be funded by the same new investors at the end of 2020, subject to certain milestones being achieved, highlighting clear potential for even more value creation for BATM’s shareholders.
Around 10 per cent of BATM’s recent equity raise will be used to accelerate development, deployment and certifications (including patents) in BATM’s molecular biology diagnostics business, and for its ground breaking agri-waste and pharma-waste treatment subsidiaries. This is a very sensible move.
Hidden balance sheet value
It’s well worth pointing out that BATM’s retained stake in Ador is held in BATM’s balance sheet at a fraction of its read through valuation as is the company’s 95 per cent stake in Adaltis, an Italian manufacturer of medical diagnostics equipment that has a read through valuation of £45m. BATM had $18.5m (£14.8m) of net cash and conservatively valued property assets worth $16m (£12.8m) at the start of 2019, too.
BATM’s cyber security division is clearly very valuable, too, as a standalone venture. The business has been winning a raft of contracts, one reason it quadrupled operating profit to $3.6m on 16 per cent higher revenues of $57.5m in 2018.
I first advised buying BATM’s shares, at 19.25p, in my 2017 Bargain Shares Portfolio, and top-sliced half the holding, at 50p to bank a 159 per cent partial gain (‘Bargain Shares: Exploiting pricing anomalies and top-slicing’, 3 Dec 2018).
I then advised running profits, at 48p, when I covered the annual results in early March and introduced a sum-of-the-parts valuation of 60p (‘BATM’s earnings beat prompts strong upgrades’, 6 March 2019). I still feel that is a realistic valuation, implying a target market capitalisation of £263m after taking into account the £14.1m of new equity raised last month, recent developments on the Arm Holdings strategic partnership and the pending commercialisation of the Ador Diagnostics business.
Offering potentially 38 per cent share price upside to my 60p target price, I once again rate BATM shares a buy on a bid-offer spread of 43.2p to 43.5p ahead of next month’s results. They will undoubtedly make for a good read. Buy. (Source: Investors Chronicle)
11 Jul 19. Signavio, a leading provider of business transformation solutions, today announced a $177m investment to fuel continued international expansion and further investment in its world-class software suite. The transaction was led by Apax Digital, the growth equity team of Apax Partners, with participation from DTCP. Existing investor Summit Partners will retain an equity stake in the business.
Signavio’s Business Transformation Suite enables its over 1,300 customers to effectively mine, model, monitor, manage and maintain their business processes. Its intelligent decision-making tools address digital transformation, operational excellence and customer centricity, helping place process at the very heart of organizations. Signavio has grown its revenue by more than 70% in the last twelve months. Today the company’s software is used by more than one million users across industries and geographies, including leading companies such as SAP, Deloitte, Liberty Mutual, Bosch, Comcast-NBCUniversal.
This new investment will be used to accelerate international expansion and to further invest in Signavio’s product suite. The company already has 9 offices across the world and is expanding operations in Japan and India, increasing its employee base by over 50% in 2019. Earlier this year, Signavio was recognized as a March 2019 Gartner Peer Insights Customers’ Choice for Enterprise Business Process Analysis Software.
“10 years ago, we set out on a journey to tackle the time-consuming practices that limit business productivity,” said Dr. Gero Decker, CEO and co-founder of Signavio. “This significant new investment further validates our approach to solve business problems faster and more efficiently, unleashing the power of process through our unique Business Transformation Suite. We are thrilled to welcome Apax Digital as our new lead partner, and look forward to building upon our success to date by leveraging our partners’ operating capabilities and global platforms for our international expansion.”
Concurrent with this investment, Daniel O’Keefe, Managing Partner, and Mark Beith, Managing Director, of Apax Digital will join Signavio’s board of directors. Summit Partners Managing Director Matthias Allgaier will retain a seat on the company’s board of directors.
“As businesses have become more global, and workforces more distributed, business processes have proliferated, and become more complex,” noted Mr. O’Keefe and Mr. Beith. “Signavio’s cloud-native suite allows employees across an enterprise to collaborate and transform their businesses by digitizing, optimizing and ultimately automating their processes. We are tremendously excited to partner with the Signavio team and to support their vision.”
“With innovative, intelligent and easy-to-use solutions, Signavio is helping to enable digital transformation across thousands of organizations worldwide, enabling new use cases and extending the reach of BPM software from IT to business users,” said Matthias Allgaier, Managing Director with Summit Partners, which first invested in Signavio in 2015. “It has been a delight to work closely with Gero and the entire team to support the company’s impressive growth thus far. We are thrilled to welcome Apax and to continue our partnership with Signavio.”
The transaction is expected to close later this year, subject to regulatory approvals.
Over 1 million users in more than 1,300 organizations worldwide rely on Signavio’s unique offering to make process part of their DNA. Signavio’s business transformation suite enables mid-size and large organizations to effectively mine, model, monitor, manage and maintain their business processes. Its intelligent decision-making tools address digital transformation, operational excellence and customer centricity, placing them at the heart of the world’s leading organizations. Headquartered in Berlin, with offices in US, UK, France, Netherlands, Switzerland, Singapore and Australia, Signavio is well placed to deliver local services on a global scale. For more information, visit www.signavio.com.
About Apax Digital
The Apax Digital Fund specializes in growth equity and buyout investments in high-growth enterprise software, consumer internet, and technology-enabled services companies worldwide. The Apax Digital team leverages Apax Partners’ deep tech investing expertise, global platform, and specialized operating experts, to enable technology companies and their management teams to accelerate the achievement of their full potential.
Over its more than 40-year history, Apax Partners has raised and advised funds with aggregate commitments of c.$50bn. These funds provide long-term equity financing to build and strengthen world-class companies. For more information see: www.apax.com.
DTCP is an investment management group with c. $1.7bn assets under management and advisory from Deutsche Telekom and other corporate and institutional investors, and a portfolio of over 60 companies. The group provides venture and growth capital, private equity investments, and advisory services to the technology, media and telecommunication sectors. It operates and invests in Europe, the US, and IsraelAbout Summit Partners
Founded in 1984, Summit Partners is a global alternative investment firm that is currently managing more than $19bn in capital dedicated to growth equity, fixed income and public equity opportunities. Summit invests across growth sectors of the economy and has invested in more than 500 companies in technology, healthcare and other growth industries. Summit maintains offices in North America and Europe, and invests in companies around the world.
10 Jul 19. Hanging up on BT. Towards the end of 2018, it looked to us as though a recovery was on the cards for BT (BT.A), which prompted us to include the (contrarian) stock in our Tips of the Year issue. We noted that incoming chief executive Philip Jansen would face pressure to address BT’s cash flows and dividend, partly due to its hefty pension deficit. But we also noted Mr Jansen’s reputation for restructuring businesses and that broader economic concerns could enhance the defensive appeal of the telecoms giant.
But, as explored within this week’s upcoming Income Majors feature, this year has seen mounting pressure on BT to increase spending, while competition in fibre has been growing. Some brokers have been slashing free cash-flow forecasts in response. Given the stretched balance sheet, this is precisely what we did not want to see happening.
BT’s depressed shares give a dividend yield of over 7 per cent, which is so high it suggests the market is betting on a cut in the not-too-distant future. A mentioned in our original tip, slashing the dividend may be the smartest long-term move. We no longer perceive a buying opportunity – but we think BT could be worth hanging on to at 195p all the same. Hold. Last IC View: Buy, 206p, 20 Jun 2019. (Source: Investors Chronicle)
09 Jul 19. Graphene Nanotubes Manufacturer OCSiAl Joins the Ranks of Unicorn Companies With $1bn Valuation. OCSiAl, the world’s largest manufacturer of graphene nanotubes, recently was added to the CB Insights Global Unicorn Club, a list of startup companies valued at $1bn or more. OCSiAl made the list after A&NN Investments acquired a 0.5% stake in the company for $5m. OCSiAl was the first company to produce high-quality graphene nanotubes on an industrial scale. When it entered the market in 2014, OCSiAl offered graphene nanotubes to consumers at a price that was 75 times lower than those on the market, thereby making nanotubes accessible to a much larger number of industries. OCSiAl’s revenues have been doubling annually ever since, and the company expects to go public by 2025.
“We are confident that the value of OCSiAl will steadily grow in the long term, so we are thinking of increasing our share in the company,” said Rafael Abramyan, Investment Director at A&NN Group.
“By industry standards, graphene nanotubes are a relatively new material. Today we are observing the emergence of markets for its application,” said Yuriy Koropachinskiy, President of OCSiAl. “What is important is that these include not only the high-tech sector, but also mass-produced goods. We believe the company will be worth at least $100bn in ten years’ time.”
Today, OCSiAl’s annual production capacity is sufficient to improve hundreds of thousands of tons of various materials. The company is rapidly increasing its output and plans to launch the first train of the world’s largest graphene nanotube synthesis plant in Luxembourg, its international headquarters, in 2022. OCSiAl’s customers include global car manufacturers, leading electronics companies, and major chemical producers.
Graphene nanotubes can drastically improve the properties of well-known materials, even when introduced in amounts as small as tenths or even hundredths of a percent. Ultra-strong, conductive nanotubes are now widely used in the aerospace, automotive, construction, mining, electronics and transport industries. There are considerable benefits related to energy efficiency and the reduction of CO2 emissions. For example, graphene nanotubes are expected to help improve the efficiency of electric vehicles by as much as 60%.
Nanotubes enable energy costs to be reduced at all stages of the product life cycle by reducing the amount of resources required for production, reducing the weight and quantity of the materials used, decreasing energy consumption during operation and disposal, and increasing the products’ lifespan.
As the world’s largest producer of graphene nanotubes, OCSiAl is powering material transformation by making nanoaugmented materials scalable and cost-effective. The company’s TUBALL™ and TUBALL MATRIX additives enable manufacturers to augment base materials with very small amounts of graphene nanotubes to reduce weight, increase strength, add conductivity and improve adhesion. Through its unique production process, OCSiAl can produce large quantities of graphene nanotubes at a cost 75 times lower than competitive technologies. Headquartered in Luxembourg, OCSiAl is a worldwide company with more than 400 employees and 600 business partners. The company’s Americas business is headquartered in Columbus, Ohio, and is the exclusive provider of TUBALL and TUBALL MATRIX in North and South America. For more information visit ocsial.com. (Source: BUSINESS WIRE)
08 Jul 19. ITT Completes Acquisition of Matrix Composites. Strategic Acquisition Expands ITT’s Portfolio of Aerospace Composites Products and Technologies. ITT Inc. (NYSE: ITT) announced today that it has acquired Matrix Composites, Inc., a specialty aerospace component manufacturer located on the Florida Space Coast with over two decades of experience specializing in the manufacture of precision composite components for next generation, high growth aircraft and aircraft engine platforms.
The acquisition aligns with ITT’s growth strategy focused on enhancing its product portfolio with innovative, technologically differentiated businesses. Matrix Composites will expand ITT Connect and Control Technologies’ core aerospace product and technology capabilities.
“This acquisition expands our ability to serve our aerospace customers with a broader set of capabilities in the composites space,” said ITT CEO and President Luca Savi. “We look forward to Matrix joining ITT and to continuing to grow within the aerospace business.”
“We are excited to welcome this fast-growing composites technology company to ITT Connect and Control Technologies,” said ITT Connect and Control Technologies President Farrokh Batliwala. “Matrix Composites significantly enhances our composite portfolio and expands our aircraft engine content. We look forward to leveraging our combined strengths to build on Matrix Composites’ entrepreneurial spirit and growth-oriented track record.”
Matrix Composites, Inc., which is headquartered in Rockledge, Florida, has 115 employees and an estimated 2019 revenue of approximately $22m.
The transaction, valued at $29m, was funded from the company’s cash and is expected to be accretive in the first year. The transaction value includes an earnout and is subject to customary working capital adjustments. (Source: BUSINESS WIRE)
10 Jul 19. Chemring “fairly valued” following recent rally, says Berenberg. In a note, the German bank said shares in the firm were the “best performing” in the pan-European aerospace and defence sector. Chemring’s shares have risen 26% over the last three months, well over the 4% sector average. Shares in aerospace firm Chemring Group PLC (LON:CHG) are “fairly valued” following a recent rally according to analysts Berenberg, who on Wednesday downgraded the stock to ‘hold’ from ‘buy’. In a note, the German bank said Chemring shares were the “best performing” in the pan-European aerospace and defence sector over the last three months, rising 26% versus the sector average of 4%.
Following the rise, Berenberg said the share price now reflected the Company’s fundamentals which justified the downgraded rating, however it also upped its target price to 190p from 180p, a 3.1% premium to Chemring’s close price on Tuesday.
“We continue to view Chemring as an improving equity story, with a new management team delivering a medium-to-long-term improvement strategy”, analysts said, adding that the firm’s earnings quality was being “enhanced” by transitions from commodity products towards higher-margin and “more predictable” revenue streams.
However, the bank did also voiced caution around some near-term operational risks, particularly a phase restart of its UK Countermeasures site following an explosion in last August as well as an ongoing investigation by the UK’s Serious Fraud Office into two small historical contracts, a legal dispute between a subsidiary and the US Army and a potential liability relating to tax exemption from the UK’s Controlled Foreign Company regime, both of which could weigh on sentiment.
In late-morning trading on Wednesday, Chemring shares were steady at 184.2p. (Source: proactiveinvestors.co.uk)
08 Jul 19. Astronics Signs Definitive Agreement to Sell its Airfield Lighting Product Line. Astronics Corporation (Nasdaq: ATRO), a leading provider of advanced technologies for global aerospace, defense, and other mission critical industries, announced today the signing of a definitive agreement under which Hughey & Phillips, LLC, will acquire the Airfield Lighting product line from Astronics. The transaction, subject to customary closing conditions and adjustments, is expected to close on or before July 12, 2019.
Peter J. Gundermann, Chairman, President and Chief Executive Officer, commented, “As we continue to build and grow our business, the Airfield Lighting product line comprised less than 1% of our 2018 revenue and no longer fits within our core offerings. This transaction allows us to focus our efforts and drive more profitable growth across our organization.” (Source: BUSINESS WIRE)
09 Jul 19. Cisco in $2.6bn deal to buy Acacia Communications. Cisco Systems will acquire high-speed optical components maker Acacia Communications in a $2.6bn deal it hopes will better position it for expected growth in cloud computing. Already one of Cisco’s suppliers, Acacia has agreed to be acquired for $70 a share, representing a 45.7 per cent premium to the target’s closing price on Monday and valuing it at $2.6bn net of cash and marketable securities. “With the explosion of bandwidth in the multi-cloud era, optical interconnect technologies are becoming increasingly strategic,” David Goeckeler, Cisco executive vice-president said, referring to the use of multiple cloud computing and storage services within a single architecture. “The acquisition of Acacia will allow us to build on the strength of our switching, routing and optical networking portfolio to address our customers’ most demanding requirements”, he added. San Jose-based Cisco expects Acacia’s technology to “enrich” its own optical systems portfolio, which it already offers to service providers, as well as enterprise and public sector customers. Acacia’s customers include data centre operators and telecom service providers. The deal represents Cisco’s biggest takeover since the $3.7bn deal for AppDynamics in 2017. Acacia shares rose 37 per cent in early trading on Tuesday, while those in Cisco added 0.5 per cent. (Source: FT.com)