02 Oct 20. Rolls-Royce to raise $6.5bn to cope with COVID cash crunch. Rolls-Royce RR.L plans to raise a total of £5bn ($6.5bn), including £2bn from shareholders, to cope with a “worst case scenario” as the coronavirus travel crisis crushes the British engine maker’s cashflow.
Airlines pay Rolls based on how many hours its engines fly in their larger jets and worries over a long-haul travel slump have knocked more than 80% off its shares this year, reducing its market value to just £2.5bn.
Rolls, whose engines power the Boeing 787 and Airbus 350, said in May it would cut 9,000 jobs as a result of the pandemic and its finances have come under intense scrutiny, which its chief executive said should end with Thursday’s plan.
“This is a comprehensive package which will take any liquidity questions off the table through this crisis,” CEO Warren East told reporters on a call.
“We wanted this package to provide sufficient headroom even through our worst case scenario,” East said.
A rights issue has been mooted as an option since July, but East said Rolls had to first demonstrate its restructuring plan was working before it could tap shareholders.
“We couldn’t really have done this much quicker,” he said.
Rolls faces what East called a “pinch point” towards the end of 2021 when £3.2bnof debt needs to be repaid. To pay for the crisis, Rolls’ debt will jump to over £3.5bn this year from £993m last year.
Worries about its finances have prompted speculation of a government bailout of Rolls, which was nationalised in 1971 and later privatised.
But Chief Financial Officer Stephen Daintith dismissed this, saying: “That’s not part of any of our plans”.
Britain’s best known engineering firm is a key supplier to the country’s military programmes, invests heavily in research and development and helps sustain smaller suppliers.
Rolls shares were down 11% to 116 pence at 1118 GMT, their lowest level since 2004, after it said that it would raise about £2bn through a 10 for 3 discounted rights issue.
This was fully underwritten at 32 pence per share, it said, a 41% discount to the theoretical ex-rights price, which analysts calculated at 54.6 pence.
“The raise is coming at a deeper discount than expected and the recovery scenarios presented were more optimistic than the market is currently thinking,” Investec analyst Ben Bourne said regarding Thursday’s share price fall.
LONG HAUL AHEAD
On the flying recovery, East said Rolls was now able to withstand a downturn which would involve 2021 flying levels at less than half last year’s levels. But long distance flying remains in the doldrums with a second wave of the coronavirus across Europe and airlines cutting back already reduced schedules.
Rolls said if long-haul travel did recover, then despite a cash outflow of £4bn this year it expected to return to positive cashflow during the second half of next year and was targeting £750m of free cashflow in 2022.
Shareholders will vote to approve the rights issue at a general meeting expected to be held on Oct. 27 and conditional upon its completion, additional debt options will open up.
Rolls said it intended to begin a bond offering to raise at least £1bn, while UK Export Finance has indicated it was ready to support an extension of its 80% guarantee of Rolls’ existing £2bn five-year term loan and would support a loan amount increase of up to 1 bn pounds.
Rolls also said it had commitments for a new two-year loan facility of 1 bn pounds.
Yields on Rolls’ bonds edged off their highs, with a €500mi May 2024 note trading at 4.93%, well off this week’s high of 5.25%. GB181957506=.
The new debt follows a plan announced in August to raise at least £2bn from the sale of Rolls’ Spain-based turbine blade maker ITP Aero and other assets.
In July, Rolls’s debt rating was cut to junk by Moody’s, but with the equity raising and disposals, Rolls said it should be able to return to an investment grade rating in the medium term, helping boost airline customer confidence in contracts.
“A strong financial position matters a lot to our customers,” said East.(Source: Reuters)
01 Oct 20. Babcock’s rudderless ship. Babcock (BAB) provides critical engineering services across the marine, nuclear, land and aviation markets. Within these sectors, its primary focus is on defence activities, which accounted for more than half its revenue in the year to 31 March. The group’s biggest customer is the UK Ministry of Defence (MoD), and as its number two supplier behind BAE Systems (BA), Babcock does everything from military training to shipbuilding. But despite its defence proclivities, the group has struggled to shake the perception that it is a traditional outsourcer like Serco (SRP) as opposed to a defence contractor like QinetiQ (QQ.). This hasn’t been helped by a long track record of underperformance – its shares have gone from almost 1,300p in 2014 to just 235p now.
Readers of the magazine’s Ideas Farm data pages may have noticed Babcock as a consistent presence in our weekly list of London’s most shorted stocks. Short interest currently stands at close to 6 per cent of its issued share capital. While this is down from the 9 per cent peak last year, short interest is rising once again. This comes in the wake of a dire set of full-year results unveiled in June in which Babcock sank to a £165m statutory operating loss, from a £197m profit a year earlier. It was weighed down by over £500m of exceptional charges, largely relating to its aviation business. Here, Babcock is paying the price for past mistakes, in particular its £1.8bn purchase of helicopter operator Avincis in 2014, which put it in the business of transportation back and forth from oil rigs. Crude oil was priced at around $108 (£84) per barrel when the deal was completed, and within a few months the price fell dramatically and has yet to recover anywhere near previous highs. An increasingly competitive pricing environment has only compounded these woes.
The aviation segment – which accounts for around a fifth of overall underlying operating profit – has seen its margin deteriorate from 15.5 per cent in 2016 to 12.1 per cent in 2020. With the ongoing Covid-19 crisis set to squeeze margins across the whole business, this could make it harder for Babcock to meet its medium-term target of sustaining an 11 per cent group margin. The overall underlying operating profit margin came in at 10.8 per cent last year, down from 11.4 per cent in 2019.
The Avincis acquisition has not been Babcock’s only hurdle. In the past, the group has found itself under siege from a mysterious research firm called Boatman Capital. It first released a report on the company in October 2018, alleging that it “systematically misled investors by burying bad news about its performance”. That was followed by a sequel in May 2019 that criticised Babcock’s corporate structure, labelling it as “opaque” and “needlessly complex”. Babcock decried the “malicious attack” at the time, and while the veracity of Boatman’s claims are questionable, its reports nonetheless helped erode investor confidence.
There is now new leadership at Babcock’s helm. Long-standing chief executive Archie Bethel was replaced by David Lockwood – former head of Cobham – in September, which followed the appointment of Ruth Cairnie as chair last year. While both Mr Lockwood and Ms Cairnie have demonstrated confidence in their company by purchasing shares, this has done little to change investor or analyst sentiment.
Analyst downgrades have become an almost regular occurrence, with the latest set of revisions coming in the wake of Babcock’s August trading update. The group revealed that its underlying operating profit in the three months to 30 June was down 40 per cent year on year, with around half of the reduction due to lower productivity in the wake of Covid-19. The pandemic has hit its short cycle work in particular – such as its airport and rail activities – which accounts for around a fifth of total revenue. But Babcock’s long-term contracts have not been left unscathed, either. With profits being recognised when certain milestones are reached, slower progress has fed through to lower margins.
On the defensive
There are things to like about Babcock – for example, around 80 per cent of its revenue is derived from long-term, non-discretionary contracts. The group is currently sitting on a £17.3bn order book, which has been buoyed by the contract to design and build five Type 31 frigates for the UK navy. With each ship costing on average £250m to produce, profits are set to ramp up from 2022 – analysts at JPMorgan estimate that annual underlying operating profit from the Type 31 programme will be £10m in 2022 before eventually rising to £20m. The group has also identified a £17bn pipeline of opportunities, of which almost 50 per cent are outside of the UK.
But it may not be all plaining sailing in defence. Military budgets could come under pressure in a post-Covid world as governments face up to the scale of borrowing undertaken to weather this crisis. An additional complication is the UK’s integrated review into security, defence, development and foreign policy, which will shape the agenda for years to come. Babcock could find itself in the crosshairs of Dominic Cummings and his war on Whitehall waste. Mr Cummings has been particularly scathing about MoD procurement in the past – not entirely unwarranted given the blackhole in its 10-year equipment plan, which the National Audit Office (NAO) estimates could be up to £13bn. Even if Babcock wasn’t subject to outright cuts, it has previously experienced slower growth when defence projects are delayed.
The UK’s review is likely to see a shift away from conventional warfare – something that Babcock has traditionally specialised in – towards newer capabilities such as space and cyber. It’s therefore not ideal that the group chose to sell its cybersecurity business, Context, for £107m in March. Babcock is looking to expand its technological capabilities and has its eye on the MoD’s ‘maritime electronic warfare systems integrated capability’ (MEWSIC) contract that will provide the next generation electronic warfare programme for surface ships.
Following the Avincis acquisition, Babcock saw its net debt more than double in 2015, to £1.3bn, although it has been slowly decreasing ever since. Excluding lease liabilities, net debt ticked down by 4 per cent in the year to 31 March to £922m. Equivalent to 1.7 times cash profits (Ebitda), this is above the group’s 1-1.5 times target range. Net debt has since fallen further thanks to the £85m sale of its stake in military training services business Holdfast, but Babcock is guiding that leverage will increase to 2 times cash profits by the end of the current financial year. It’s worth noting that those lease liabilities tot up to a not insignificant £673m and Babcock also used around £100m of ‘invoice factoring’ last year – this is where trade receivables are sold to banks who go on to recoup the money owed from suppliers so that Babcock can receive cash more quickly.
The group does have a decent track record of generating free cash flow, but while it had been aiming for £250m of underlying free cash flow last year, the actual total came in at £192m. This came amid a £27m working capital outflow as Covid-19 delayed customer payments and also interrupted asset sales leading to higher-than-expected capital expenditure. Babcock is aiming to produce £1.4bn of free cash flow over the next five years, but analysts at Numis believe it will fall short of this target at £713m. This is largely based on lower expected profits and higher pension contributions. Having made a £70m payment to its pension schemes in 2020, this is expected to rise to £75m in 2021. Babcock will also pump an additional £90m into its Rosyth dockyard scheme over two years, although the starting point has yet to be determined. With uneven deficits across its three main pension schemes – the total actuarial deficit is £500m – Babcock has warned that its pension funding will be more volatile in the coming years.
A value play or a value trap?
Looking at a range of valuation metrics (see table), Babcock has been getting cheaper over the past few years and in its weakened state, it has already become a takeover target – it rebuffed two unsolicited advances from Serco for an all-share merger in 2018 and 2019. Serco could conceivably come back for another crack – chief executive Rupert Soames recently told the Financial Times that “the market is facing an era of consolidation and we are in a position to be a part of it”. Babcock could also show up on the radar of private equity, particularly in the wake of Cobham’s sale to Advent International – although the government’s ‘golden share’ in the Rosyth and Devonport dockyards would complicate a foreign buyout.
With the shares being so depressed, investors may be tempted to see this as a buying opportunity. But according to analysts’ predictions, return on equity (a key measure of quality and profitability) is set to fall further, which doesn’t bode well for its recovery prospects.
There is a certain amount of irony in the fact that a company involved in preparing for actual warfare has a market cap of £1.2bn, while Games Workshop (GAW) – which specialises in fantasy battles – is worth more than £3bn. Although perhaps this is just an accurate reflection of how far Babcock has fallen and the high level of debt and pension deficit. The shares have been on a long-term downward spiral and it’s difficult to see any near-term catalyst that could stop them from sinking any further. With Covid-19 adding to existing pressures, uncertainty over defence spending and pension obligations weighing on cash flows, it’s questionable whether the awaited turnaround will materialise. Last IC View: Hold, 379p, 11 Jun 2020. (Source: Investors Chronicle)
01 Oct 20. Rolls-Royce tumbles further as £2bn rights issue unveiled. Royce (RR.) has finally unveiled plans for a £2bn rights issue as part of a package of measures to recapitalise its balance sheet. The aero-engine maker has also announced a bond offering to raise at least £1bn and secured conditional commitments for £2bn-worth of additional loans subject to the rights issue being completed. These comprise a new two-year term loan facility for £1bn and a £1bn extension to its existing five-year term loan. The latter is being backed by an 80 per cent guarantee from UK Export Finance, a government credit agency.
The fundraising comes amid the Covid-19 squeeze on international air travel and the civil aerospace industry. Rolls saw its engine flying hours collapse by around 50 per cent in the first six months of 2020, which is significant because it operates a ‘power-by-the-hour’ business model – this means that it typically sells its engines at a loss and earns revenue according to how long they spend up in the air. Throwing in a £1.1bn hit from halting invoice discounting, the knock-on impact was that Rolls saw a £2.8bn free cash outflow in the first half of the year. It also ended the half with £1.7bn of net debt (excluding lease liabilities) and without the rights issue, it believes this will hit £3.5bn by the year-end. Adding to the pressure, Rolls has £3.2bn of debt maturing between now and the end of 2021.
Together with the £2bn it is targeting from business disposals – which includes Spanish subsidiary ITP Aero – Rolls says that the rights issue will help reduce leverage and provide sufficient liquidity for even its worst case scenario. This entails a second wave of Covid-19 and the reintroduction of stringent international travel restrictions. In a reasonable worst case situation, Rolls estimates that engine flying hours would finish the year down 65 per cent versus 2019 and still be down 20 per cent even in 2022. Without the new loans being proposed, Rolls believes that the rights issue proceeds and its existing debt facilities could fund its requirements for the next 12 months.
The £2bn being sought through the rights issue is lower than the £2.5bn widely anticipated. Rolls had been expected to tap sovereign wealth funds from Kuwait and Singapore for a £500m equity investment, but according to Sky News, the group abandoned the plans after existing institutional shareholders expressed concerns over the dilution of their stakes.
The 10-for-3 rights issue will be priced at 32p per share, a hefty 41 discount to its theoretical ex-rights price on 28 October and a 75 per cent discount to its closing price on 30 September. The fundraise will be fully underwritten and is subject to shareholder approval.
Rolls is still guiding to £4bn free cash outflow for the full year, but is targeting at least £750m of positive free cash flow in 2022. This comes as it retains its faith in the future prospects of civil aerospace. The group believes that its relatively young base of installed engines will generate annuity-style cash flows over the long term from aftermarket servicing activity. Aiming to boost returns by scaling back on capital investment, it has already reduced capital expenditure by a third this year as part of a bid to make £1bn-worth of savings. The civil aerospace business is also being restructured to better match market demand.
Given the dire state of affairs, shareholders have little choice but to vote in favour of the rights issue – the group warned back in August that if its worst case scenario comes to pass, it could impact its ability to continue as a going concern. Because the rights issue is fully underwritten, Rolls will therefore receive the £2bn it is looking to secure. But it will be a long journey back to recovery for civil aerospace, particularly as Rolls depends on long haul travel which bounces back more slowly than domestic and regional flight activity. The International Air Transport Association (IATA) doesn’t believe that global passenger traffic will rebound to normal levels until 2024. In the meantime, the downward spiral of Rolls’ shares continues and they fell by a further 10 per cent following this announcement – a good indicator of how investors feel about Rolls dragging its feet on this issue and finally revealing a late-stage cash call. Now languishing at just 116p, these levels were last seen back in 2003. There is still time to disembark before they fall further. Sell.
Last IC view: Sell, 162p, 21 Sep 2020. (Source: Investors Chronicle)
01 Oct 20. TempoCap leads $12.1m Funding Round for Dedrone. Airspace security technology leader leveraging the new investment to propel global expansion. Dedrone, the global market and technology leader in airspace security, which protects organizations from malicious drones announced today that it has secured $12.1m (£9.1m) in funding.
Based in San Francisco, Dedrone was founded in 2014 and is backed by investors including Felicis Ventures, Menlo Ventures, and John Chambers, Chairman Emeritus of Cisco Systems and founder of JC2 Ventures.
The funding round is led by the leading European technology investment company, TempoCap, which has a proven track record of investing in security technology and fast growing software businesses. Backing ambitious founders, TempoCap supports sizeable businesses addressing real world challenges with a clear technological differentiation.
Following this successful investment, Dedrone will accelerate development of its best-in-class platform providing early warning, classification of, and mitigation against drone threats. The Dedrone platform is complete counter-drone solution designed to detect, and classify drone-based threats. The Dedrone system detects approaching drones with the help of radio sensors as well as special camera and radar systems, whose data are processed by the intelligent DroneTracker software.
Commenting on the investment, Aaditya Devarakonda, CEO of Dedrone, said, “Drone technology has advanced tremendously in the past few years, and today drones significantly aid in surveying, disaster relief, delivery, and myriad business and consumer applications. However, in the wrong hands, a drone’s accessibility, capabilities, and ease of flying make it especially suitable for hacking, surveillance, and terrorism.”
“Quite simply, this is cutting edge-technology delivering a massive difference to governments, businesses and critical national infrastructure,” said Olav Ostin, Managing Partner, TempoCap. “It’s a market that is growing rapidly, and we’re investing in the best company in this sector.”
Philipp Meindl, Investment Partner at TempoCap added: “The impact of illicit drone usage has been felt by thousands of people and organizations and unfortunately, it’s a threat that’s only going to get more prevalent as drones become more widespread. We’re excited to address this challenge head-on.” (Source: PR Newswire)
01 Oct 20. Kathryn Clamp launches own firm aged 61 and marks its fifth anniversary. An entrepreneur from Oxfordshire who started her own business at the age of 61 in cutting-edge technology is celebrating a landmark anniversary.
Kathryn Clamp launched kc4business Ltd to provide outsource business development and sales support services after she was made redundant.
Now she is marking the fifth anniversary of her own business, supporting innovative technology firms across the UK.
Ms Clamp, who is now 66, said: “Age really is no barrier to success.
“It is incredibly rewarding to be able to use my many years of experience to support ambitious businesses of all sizes in their growth plans.
“Many of my clients are on the cutting edge of technology, and it is exciting to combine my experience with their new ideas to achieve results.”
Ms Clamp added: “To reach my fifth anniversary really is a milestone and I am very grateful to my clients and everyone who has supported me so far.
“There is plenty to look forward to and be positive about despite the ongoing impact of Covid, which makes relationship building and collaboration between businesses more important than ever.”
The company boss began her career in the army before working as a business account manager and member of the UK management team at leading electrical component manufacturer E-T-A Circuit Breakers Ltd for more than 20 years. (Source: Google/https://www.oxfordmail.co.uk/)
01 Oct 20. Elbit Systems strengthens its business operations in Germany, rebranding its wholly-owned German subsidiary TELEFUNKEN RACOMS as Elbit Systems Deutschland GmbH & Co. KG (“Elbit Systems Deutschland”). The company will be managed by Thomas Nuetzel, who has served as the CEO of TELEFUNKEN RACOMS for the past 10 years. With a long tradition of providing high-quality solutions to the German Armed Forces, TELEFUNKEN RACOMS has been focusing during recent years on diversifying, leveraging its research and development capabilities as well as its engineering and manufacturing excellence. Steadily growing, TELEFUNKEN RACOMS has been adding to its Ulm-based operations a range of technologies from across the Elbit Systems portfolio, including: Electro-Optics, Electronic Warfare, Direct Infra-Red Countermeasures, Software Defined Radio, Cyber, Unmanned Systems, Command & Control and others.
Thomas Nuetzel, CEO of Elbit Systems Deutschland, said: “I am proud to lead the operations of Elbit Systems in Germany. We see a great potential for growth as we continue to broaden the range of our offering, expand our engineering workforce while addressing requirements for German sovereignty. We intend to further expand existing co-operations with the German industry and explore new ones.”
Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented: “Germany is an important market for Elbit Systems. We have been operating in Germany for more than a decade, proudly supporting the German Armed Forces, diligently building our engineering base and developing co-operations with local industry. Elbit Systems Deutschland is led by an excellent team, and I am confident that it will continue to steadily grow and play an increasingly meaningful part in Germany’s technological and industrial base.”
01 Oct 20. Rolls-Royce £2bn Equity. Up to £3bn Debt. Key Takeaway. A £2bn rights and a bond offering of at least £1bn are the lead elements in a holistic package that could also see finalised commitments for a new £1bn term loan and in-principle support from UKEF to increase the 80% guarantee to permit the existing 5-year term loan to rise from £2bn to £3bn. The last two elements are conditional on the rights issue. Under its Base Case, Rolls-Royce continues to target FCF of £750m as early as 2022. In reflecting the rights issue, we deducted £2.5bn from end FY21 net debt rather than £2bn. The £2bn rights issue is a 10 for 3 at 32p, meaning around 6,437m new shares are issued, giving a theoretical ex-rights price (TERP) of 54.6p. The path of liquidity. Under the path outlined by Rolls-Royce at the 1H20 stage and repeated today, end 1H20 liquidity of £8.1bn is eroded by -£1bn of FCF in 2H20,
-£0.8bn of restructuring, bond maturities of £1.3bn, and the RCF maturity of £1.9bn. That takes liquidity to £3.1bn before FY21 FCF. Company-sourced consensus FY21 FCF is -£0.9bn. End FY21 liquidity emerges at £2.2bn. The rights, bond, and loan package announced today raises that to £7.2bn. At the 1H20 stage, business disposals to raise at least £2bn within 18 months were announced. Path of net debt. At the 1H20 stage, end FY20 net debt, excluding leases, was guided at around £3.5bn. Adding -£0.3bn of restructuring spend, -£0.1bn of financial penalties paid, and FY21 FCF of -£0.9bn, gives end FY21 net debt of around £4.8bn. The rights issue would reduce that to £2.8bn. FY22 FCF of £750m and business
disposal proceeds could see the balance sheet return to almost debt free in FY22. At the 1H20 stage it was stated disposals would be pursued on a timeline that maximised shareholder value, but the 18-month timeline is re-iterated today. Reasonable Worst Case (RWC). So far, we have adhered to Rolls-Royce’s Base Case, not its RWC. The RWC’s impact on FY20 and FY21 Engine Flying Cash receipts alone would be approximately -£1.05bn (based on Rolls-Royce’s guidance of each 1% change being +/- £30m), but the RWC would have wider ramifications, such as fewer major engine shop visits, lowering the cash spend. We believe the RWC dominated
sentiment towards Rolls-Royce in the wake of the 1H20 results. Curiously, we could not discern the same in peers like Airbus and Safran. Running the numbers. To show the impact of the rights issue, we use company sourced consensus FY22 FCF (£544m) and EPS (18.5p) and Rolls-Royce’s FY22 FCF ambition of £750m. Table 1 below shows the pre and post-rights data for FCF per share and EPS. We have not made any adjustments to reflect the impact on interest payments from the proposed bond issue and potential new loans. The loans may not be drawn and consensus FCF may anticipate a higher level of interest than under the Base Case. Nor have we adjusted for the disposal of businesses. (Source: Jefferies)
01 Oct 20. Rolls-Royce taps shareholders for £2bn, adds debt to survive crisis. Britain’s Rolls-Royce RR.L said it planned to raise £2bn ($2.6bn) from shareholders, £1bn from the bond market and secure further loans to rebuild its balance sheet after COVID-19.
The pandemic has battered Rolls’s finances as airlines pay the company according to how many hours its engines fly in wide-body jets. Worries that a recovery in travel will take years have pushed its share price down by 80% this year.
Rolls said on Thursday that the 10 for 3 heavily discounted rights issue was fully underwritten at 32 pence per share, a 41% discount to the closing price of 130 pence per share on Wednesday.
In May, the company said it would cut 9,000 jobs as a result of the pandemic and its finances have been the subject of media speculation since.
“The capital raise announced today improves our resilience to navigate the current uncertain operating environment,” said Chief Executive Warren East in a statement.
Rolls, a key supplier to the government on military programmes, said that the UK government through UK Export Finance has also indicated it was ready to support an extension of its 80% guarantee of Rolls’ existing £2bn five-year term loan.
It would support a loan amount increase of up to £1bn.
That is on top of commitments for a new two-year loan facility of £1bn, the company said. (Source: Reuters)
30 Sep 20. Secretive, never profitable Palantir makes its market debut. Seventeen years after it was born with the help of CIA seed money, the data-mining outfit Palantir Technologies is finally going public in the biggest Wall Street tech offering since last year’s debut of Slack and Uber.
Never profitable and dogged by ethical objections for assisting in the Trump administration’s deportation crackdown, Palantir has forged ahead with a direct listing of its stock, which is set to begin trading Wednesday. In its stock offering, the company isn’t selling newly minted shares to raise money; it’s simply listing existing shares for public trading.
The low-key strategy may not generate the enthusiasm many technology offerings do. But it’s in character for a secretive company long reliant on spies, cops and the military as customers — and whose founders are holding onto voting control of the company.
The big question for both investors and company management: Can Palantir successfully transition from a business built on the costly handholding of government customers to serving corporate customers at scale? The company is a hybrid provider of software and consulting services that often embeds its own engineers with clients.
Analysts say its future depends on selling multinationals on its tools for gathering disparate data from an ever-expanding data universe and using artificial-intelligence technology to find previously undetectable patterns. Those can theoretically guide strategic decisions and identify new markets much as they have aided in tracking terrorists and sorting military intelligence.
The company sets itself apart from most U.S. technology providers, and just moved its headquarters to Denver from Silicon Valley. Palantir colors itself patriotic and belittles other tech firms that won’t unquestionably support U.S. dominance in war fighting and intelligence.
“Our software is used to target terrorists and to keep soldiers safe,” CEO Alex Karp wrote in a letter accompanying Palantir’s offering prospectus. While Karp acknowledged the ethical challenge of building software that “enables more effective surveillance by the state,” Palantir’s prospectus touts its work helping U.S. soldiers counter roadside bombings and fight the Islamic State group.
But investors also have to reckon with the Peter Thiel factor.
The iconoclastic entrepreneur and PayPal co-founder endorsed President Donald Trump in 2016, worked on his transition team and holds the largest chunk of Palantir stock. Thiel already exerts tremendous power from the board of Facebook, which dominates global media and seeks to create a digital currency.
In its IPO prospectus, Palantir paints a dark picture of faltering government agencies and institutions in danger of collapse and ripe for rescue by a “central operating system” forged under Thiel’s auspices. As the offering is structured, Thiel will be the dominant voice among the Palantir co-founders who will retain voting control.
“Is that someone who you want deciding how a component of the (national) security apparatus is designed?” asked New York University business professor Scott Galloway. “If you believe that power corrupts and checks and balances are a good idea, this is just from the get-go a really bad idea.”
Earlier in September, BuzzFeed reported that Thiel hosted a known white nationalist, Kevin DeAnna, at a 2016 dinner party, citing emails it obtained and published whose authors refused to talk to the online news outlet. Thiel declined through a spokesman to discuss the report with The Associated Press. Critics say he shares the blame for Facebook’s incomplete removal of toxic disinformation disseminated by the pro-Trump far-right fringe.
Then there are Palantir’s fundamentals, which Galloway considers lousy. The company has just 125 customers in 150 countries, including Airbus, Merck, Credit Suisse and the Danish National Police. Slightly less than half its 2019 revenues were from government agencies, and three clients — which Palantir did not name — accounted for almost a third of revenues.
“They’re massively unprofitable and they’ve never been able to figure it out,” Galloway said, noting that it took Google three years to earn a profit, and Amazon seven. Over a much longer span, Palantir has accumulated $3.8bn in losses, raised about $3bn and listed $200m in outstanding debt as of July 31.
Palantir, named for the mystical all-seeing stones from Tolkien’s “Lord of The Rings,” has recently been deepening its relationship with Uncle Sam, including winning a modest contract early in the COVID-19 pandemic for helping the White House gather data on the virus’ impact.
Senior emerging technology analyst Brendan Burke of Pitchbook says he isn’t worried that Thiel’s association with Trump will hurt the company if Trump loses the election.
“The political connections don’t appear to be the main driver of their recent substantial contract wins,” he said, although he noted that government contracts can be more volatile than corporate ones, where Palantir’s foothold is less firm.
Palantir offers two software platforms. Foundry is designed to link disparate and largely incompatible data sources into a central operating system. It’s the company’s primary hope for broadening its business.
An earlier product, Gotham, has been used by defense and intelligence analysts and police departments to identify patterns deep within datasets. But the value of “predictive policing” tools developed with the platform have been questioned for their potential to unfairly target people of color. The New Orleans and New York City police departments, once customers, have used it.
A 2017 research paper by University of Texas sociologist Sarah Brayne, who studied the Los Angeles Police Department’s use of Gotham, found the software could lead to a proliferation of unregulated personal data collected by police from commercial and law enforcement databases.
On Monday, Amnesty International issued a briefing that says Palantir is failing to conduct human rights due diligence around its contracts with Immigration and Customs Enforcement, calling it “deeply ironic” that the company crows about its determination not to work with regimes like China that abuse human rights.
Palantir’s ICE contracts involve the maintenance and improvement of two products used in deportation raids. One of them, its web-based Falcon tool, has enhanced data accessible to investigators “involving the illegal movement of people into, within, and out of the United States,” according to documents obtained by The Associated Press, including court records, and by the nonprofit Electronic Privacy Information Center in a freedom-of-information request.
Palantir has acknowledged in its SEC filing that “unfavorable coverage in the media” and from social activists could hurt its business. It also says its contractual obligations might prevent it from being able to defend its actions publicly, although it recently named a former Wall Street Journal reporter to its board. Negative publicity over ICE contracts may also have hurt company recruitment on college campuses. (Source: Defense News)
30 Sep 20. South Korea’s Hanjin up for sale. Hanjin Heavy Industries and Construction (HHIC) – one of South Korea’s most prominent naval shipbuilders – has announced that the state-owned Korea Development Bank (KDB), its main creditor and largest shareholder, is looking to sell its stake in the company. HHIC, based in Busan, said in a filing to the South Korean stock exchange on 29 September that the KDB has invited bidders to acquire all or part of its 83.45% stake in HHIC, with the aim to finalise a preliminary bidding phase by the end of October. The stake in its entirety is expected to be worth around USD430m. South Korean naval shipbuilder HHIC– constructor of the PKX-B-class fast attack craft – has confirmed that its largest shareholder is looking to sell its stake in the company. (HHIC) In a separate statement, the KDB said it plans to sell at least 63.44% of its shareholding in HHIC and to decide on whether to divest the remaining stake before the end of final bidding. It added that its shareholding in HHIC is split across several financial institutions including the KDB itself. Institutions in the Philippines are also shareholders in the company, said the KDB. HHIC has been facing severe economic pressure for several years: a result mainly of a downturn in sales in commercial shipbuilding and construction sectors. In fiscal year 2018, the company’s sales increased year-on-year by 3% to KRW1.69trn (USD1.44bn). However, HHIC’s losses expanded from KRW278bn in 2017 to KRW1.32tr in 2018. While no HHIC sales figures for the defence sector are available, these are expected to have remained relatively strong. (Source: Jane’s)
30 Sep 20. QinetiQ beats expectations and reinstates dividend. Defence contractor QinetiQ (QQ.) has proved relatively resilient in the face of Covid-19. While the pandemic has hit its smaller global products business – which has shorter order cycles – the group has still managed to grow its revenue in the six months to 30 September. For the full year, it is guiding to “high single digit” revenue growth compared with the £1.07bn it recorded last year and believes the total will come in “modestly ahead” of analyst expectations of £1.13bn.
The larger ‘Europe Middle East and Australasia’ (EMEA) services division has seen less disruption from Covid-19 as it focuses on long-term contracts and carries out critical defence work. The group says it has been able to continue operating all of the testing ranges covered by its long-term partnership agreement (LTPA) with the Ministry of Defence (MoD), which is a 25-year arrangement that runs to 2028. It has also secured new work under its ‘engineering delivery partnership’ (EDP) with the MoD, including a £13.5m contract to supply technical support services for P8 maritime patrol aircraft.
The pandemic has had a detrimental impact on margins and the group is pointing to a one percentage point contraction from the 12.4 per cent underlying operating profit margin seen last year. Even so, profit is still expected to come in above the £128m analysts currently have pencilled in. QinetiQ says that the margin is expected to stay between 11 and 12 per cent in its 2022 financial year, but it is still aiming to reach 12-13 per cent in the medium term.
While no specifics have been provided, cash generation is said to have been “strong” and the group is now reinstating its final dividend. It will hand out 4.4p a share on 16 November to shareholders on the register at 9 October.
As it continues to win new work, QinetiQ is sitting on a backlog of more than £3bn-worth of orders, providing good visibility over its future revenues. There should also be further growth opportunities ahead as it looks to reduce its reliance on the MoD and increase its international exposure. While there is the risk that defence budgets are squeezed post-pandemic, QinetiQ believes that procurement is likely to be more “mission led”, playing to its strengths. With the shares trading at 15 times forecast 2021 earnings, this doesn’t seem too expensive for what it has to offer. Buy. Last IC View: Buy, 304p, 2 Jul 2020. (Source: Investors Chronicle)
30 Sep 20. Adrian Graves Organisation closes. So today, 30th September, we pull down the blinds on the Adrian Graves Organisation Limited … the strategic consulting, communications, public affairs, marketing and ‘Go-to Fix-it’ practice which I founded just over forty years ago, in January 1980. Mixed emotions … a lot of sadness … many memories … some achievements to celebrate (including survival!) … but a sense of irony too.
I founded the company at the bottom of a recession and after I was made redundant from Fodens, the British independent truck manufacturer which collapsed into receivership despite a multi-million-pound order book and a contract to supply vehicles for the British Army. I immediately joined the head office staff of Road Haulage Association during the ongoing Drivers’ Strike, stayed for the subsequent Diesel Crisis and then ran an industry campaign to increase vehicle weights to integrate with European standards. The irony? The Conservative government in power in 1980 was aggressively pursuing right wing ideology. Here we are, forty years later, closing the company during the reign of another Conservative government, obsessed by right wing ideology.
In the intervening years, AGO’s passion and focus never waivered … helping aspirant, ambitious British companies, large and small, to grow, become successful and often form pan-European partnerships across a then embryonic EU. On the flipside, helping EU companies to build reciprocal, collaborative and lasting partnerships with businesses in the UK. We did that. Along the way, I also stood as a centre ground parliamentary candidate three times – once for the European Parliament and twice for Westminster. Irrespective of your political colour or persuasion, just reflect on that forty-year full circle political and economic cycle … and ponder where we are today.
In 2020, AGO became one of the estimated three million plus owner run, small Limited companies for whom work (and income) stopped overnight and which then fell through the cracks of every one of the government’s Covid19 pandemic support schemes, we were far from alone.
However, we haven’t gone away
AGO Strategic, from today, our legacy ‘unlimited’ practice, is still us … still at www.adriangraves.org … just no longer a Limited company. I will continue to work as a special adviser, but now more selectively with those who understand the value of the closed doors discussions which map strategies, opportunities and futures … and help them evolve the plans and positioning required to make it all happen.
Concurrently, I continue to work as a civil funeral celebrant, supporting families, now sadly and increasingly where their loved ones have become the victims of a virus pandemic and/or its knock-on and lockdown consequences. which impacted them so hard through no fault of their own.
And finally, Ainsley Fraser, the pseudonym under which I have been writing for more than a decade, will continue to commentate and express opinions about subjects which those in authority ‘need to hear’ … rather than the platitudes they would prefer.
So for now, thank you to everyone for a fantastic forty years of AGO … we have worked with some incredible people, many of whom have become good friends, we have done some interesting, exciting, difficult, challenging, off-the-wall and even ground breaking things together … successfully supporting, promoting and writing millions of words about niche sectors from transport, vehicles and componentry to defence and security … from being in Berlin when the Wall came down to an auction of surplus, parked-up civil aircraft in the US, from working in Northern Ireland during airport privatisation and the peace process to the start-ups, launches, conferences, exhibitions, roadshows, VC/PE injections, exits, buy-ins, buy-outs and radio and television advocacy on behalf of bank customers.
Happy with that. Tomorrow is another day.
BATTLESPACE Comment: BATTLESPACE has had a long association with AGO, It has been a pleasure working with Adrian and Anne on such accounts as AutomotiveTechnik and Oldbury amongst others. We wish him and Anne a happy and safe retirement.
30 Sep 20. Palantir goes public but founders will have control for life Direct listing to include three classes of shares designed to entrench authority.
When shares in Palantir Technologies start trading publicly on Wednesday, it will mark the end of an unusually long, 17-year journey to Wall Street for the controversial company built on supplying data analytics to the national security establishment. But a last-minute flurry of warnings and amendments to its convoluted voting structure in recent days has made the process seem anything but orderly. In a filing with the US Securities and Exchange Commission less than two weeks before the listing, Palantir spelt out a barrage of new warnings about the effects of an unusually complex arrangement designed to leave control in the hands of three founders — Peter Thiel, the venture capitalist who came to wider attention after becoming Silicon Valley’s most outspoken backer of Donald Trump; Alex Karp, chief executive; and Stephen Cohen, president. Then, three days later, another amended filing explained for the first time how the founders could redesignate some of the company’s shares whenever they wanted, allowing them to “unilaterally adjust” their voting power. That was not the end of it. Hours later on the same day, came a further filing: the provision was gone. The twists and turns in Palantir’s official disclosures have highlighted controversial governance arrangements that go to even greater lengths than usual to entrench the control of the company’s founders. But Wall Street’s current appetite for fast-growing technology companies means investors are more than willing to overlook the fact that the shares they buy will not give them any control. It creates an utter lack of accountability to the investors.
This is a classic example of irrational exuberance Charles Elson, University of Delaware “If a company has a hot product or service, unfortunately, there will probably be enough people willing to look the other way on governance policies,” said Jim Tierney, a fund manager at AllianceBernstein. “Hopefully behaviours change over time . . . but I would not hold my breath.” Late on Tuesday the New York Stock Exchange set a reference price for Palantir’s shares — a rough guide to where they could start trading — of $7.25. That is at the low end of the $4.17-$11.50 range the shares have been trading at in the private market since the end of June, and would give the company a market capitalisation of about $11.7bn. Its peak valuation in the private market hit $20bn five years ago, before falling back on concerns that the company should be valued more like a consultancy than a software concern. Even Palantir admits that some of its provisions are “novel” and go “significantly” beyond the normal steps companies take to keep control in the hands of their founders after they go public. For instance, the founders would keep control even if their combined stake fell to only about 6 per cent — considerably lower than at other companies. Also, given the complexity of the share structure, Palantir warns that if its founders do not personally provide it with details of their holdings, it cannot even be sure they will not have more voting power than they are entitled to.
“It creates an utter lack of accountability to the investors,” said Charles Elson, a professor of corporate governance at the University of Delaware. “This is a classic example of irrational exuberance.” At the root of Palantir’s convoluted voting arrangements is a desire by the founders to retain more control than they could under a more typical dual-class share structure. Companies looking to entrench founder control usually issue a special class of stock that carries 10 times as many votes as other shares. But at Palantir, the supervoting stock — known as B shares — has been spread much more widely than just the three founders. As a result, the three, who own just under 30 per cent of the total shares, control about 40 per cent of the votes between them. To further boost their influence, Palantir has added a second special class of stock, called F shares, owned by the three founders through a trust. This is guaranteed to leave them with at least 49.99999 per cent of the total votes — a level the company says effectively gives them full control over the most important decisions. However, further explanations released by the company in recent days have made clear that the picture is considerably more complex even than this.
Recommended AnalysisPalantir Technologies Inc Wall Street has never seen a company like Palantir In a filing on September 18, Palantir pointed out that combined votes of the founders could go even higher if one or more of them opts out of the voting trust. If Mr Thiel votes his shares alone, for instance, the combined control of the three could increase to 65 per cent. Mr Karp has sought to set Palantir apart from other Silicon Valley companies, which he claimed had outpaced the new forms of political control needed to restrain them. Some of Palantir’s critics say there is less to separate the company from the rest of the tech industry than he suggests. The company’s voting arrangements are “not substantially dissimilar from the unequal structures found at the companies from which Mr Karp passionately seeks to distance Palantir”, according to Amy Borrus, head of the Council of Institutional Investors. The shareholder representative group wrote to Palantir earlier this month calling on it to set a seven-year limit to its distorted voting. Several tech companies that have gone public recently have agreed to such limits — though data compiled by the CII shows that the time limits they have set on the period of founder control have been creeping up. They include Slack and Peloton, whose founders will have control for 10 years, and Zoom, with 15. By contrast, Palantir’s tilted voting structure is set to stay in place until the last of its founders dies. The youngest, Mr Cohen, is 37, meaning that control of Palantir — which has said it wants to become the “default operating system” for US government data — could still be in founder hands many years from now. Meanwhile, the task management software app Asana, which will also have its public debut alongside Palantir on Wednesday, had a reference price set at $21 a share. (Source: FT.com)
30 Sep 20. Kratos, Hitting the Target After a Miss. Kratos Defense & Security Solutions, Inc. (KTOS) BUY, $19.46 PT: $23.00. On September 29, KTOS was awarded a $29MM Phase 1 Full Rate Production contract from the US Navy for 35 SSAT BQM-177 target drones. Delivery is expected to be complete by February 2022. KTOS expects to also receive an annual $15-20MM contract for related target drone payloads, counter-measures, EW, and other equipment. The new contracts are expected to contribute 12-pts to 2021 KUS sales and supports a step up in profitability exiting 2020.
KTOS Received a $29m Full Rate Production Contract for 35 SSAT Target Drones. On September 29, KTOS was awarded a $29.2MM fixed price contract for the production and delivery of 35 full rate production Lot 1 BQM-177A target drones with expected delivery through February 2022. In addition to the production contract, KTOS expects to receive an annual $15-20m contract for related target drone payloads, counter-measures, EW equipment, and other equipment. This supports ~$30m in annual sales under the new contract, or 12% contribution to our 2021 KUS segment sales estimate of $260MM. Development programs including SSAT had been a material headwind to profitability in H1:20. The full rate production contract is supportive of a Q4-weighted year with EBITDA margins of 10.2% in Unmanned Systems in Q4 from 6.3% in H1:20.
Program Background. KTOS began LRIP production on the BQM-177A in connection with a contract award in June 2017 valued at $37m. The contract was expected to run for 12-18 months. KTOS is currently in the process of completing LRIP 2, which is for 35 units. The program received initial operating capability in February 2019. KTOS had previously anticipated reaching full rate production by the end of 2020, which should provide some tailwind for margins. There have been some indications that production could eventually reach as high as 80-100 units at an estimated $1-1.2m per aircraft. We estimate the program contributes $60m to 2020 KUS sales under LRIP 2, stepping up to $66m in our 2021E.
Valkyrie Speed Bump, but Skyborg Award Expected in the NT. On July 29, there was an anomaly with the rocket-assisted take-off system during a flight experiment, which led the AFRL to abandon the demonstration and send the drone back to KTOS for inspection. The Valkyrie drone is planned to be operational again in late October. There was little damage to the drone in the incident. On July 23, KTOS, BA, General Atomics, and NOC were each awarded a place to compete under the $400m Skyborg ID/IQ under the Air Force program, where the drone would serve as a stealth communication link between fighter jets including the F-22 and F-35. On Sept. 29, the service awarded a second multi-award ID/IQ for nine additional companies including AVAV, BAE, LMT, to compete for Skyborg delivery orders. The Air Force is expected to award Skyborg prototypes for 2021 experiments in the next 30-60 days. We estimate the Valkyrie could contribute $50m in 2021E if an order is received this fall for Skyborg, up from $20m in our 2020E. (Source: Jefferies)
29 Sep 20. Fluree Closes Seed Funding Round to Power Secure Data Management in the Web 3.0 Era.
- Rapid growth startup closes $6.5m seed round led by 4490 Ventures, with participation by Rise of the Rest, Good Growth Capital, Engage Ventures and former Venrock Managing Partner Ray Rothrock.
- Closing of the seed round coincides with commencement of Phase II of the U.S. Air Force’s project to use Fluree’s Web 3.0 data management platform to create a secure, distributed data sharing system for the U.S. Department of Defense’s global operations.
- Fluree’s semantic graph data platform is at the cutting edge of innovation in verifiable credentials, data-centric security and next-generation enterprise master data management. As industries move towards data-driven B2B ecosystems, Fluree’s technology liberates data from organizational silos to empower collaborative insights and support a faster pace of innovation. Fluree, a market leader in secure data management, today announced the official close of its seed round of $6.5m in venture capital funding, led by 4490 Ventures. Additional investors in the round include Rise of the Rest, Good Growth Capital, Engage Ventures and former Venrock Managing Partner Ray Rothrock.
The latest round of funding will be used to accelerate product development efforts for building applications that utilize W3C verifiable credentials and decentralized identifiers (DID). The company has experienced substantial growth since the beginning of 2020, adding marquee customers such as the United States Air Force and Wake Forest Health.
“We couldn’t ask for a better group of investors to bolster our platform during a time of rapid blockchain innovation,” said Fluree Co-CEO Brian Platz. “As data-centric security, verifiable credentials and secure data sharing become the cornerstones of Web 3.0, Fluree and our trusted investors are becoming key players in the internet of tomorrow.”
The Web 3.0 Data Management Platform
As Web 2.0 continues to sag under the weight of excessive integrations and costly and insecure data lakes, the Fluree platform heralds a new era of secure, trustworthy data management. Fluree is the pluggable stack that developers need to build enterprise-grade Web 3.0 applications with cryptographically-secure data integrity.
Leading organizations in sectors including education, supply chain and healthcare are employing the platform to build secure blockchain applications that fix some of the Internet’s biggest problems. The recent funding round in particular will drive new innovation around a much-needed ecosystem of verifiable credentials and DIDs. Fluree is available on all leading cloud providers, including Amazon AWS, Google Cloud Platform and Microsoft Azure.
Investor Perspectives on Fluree Seed Funding Round
“The power of data-centricity is evident in the market dominance and profitability of data-centric companies, such as Amazon, Google and Microsoft. Fluree’s mission is to enable enterprises to evolve from their current state of being application-centric to becoming data-centric,” said Dan Malven, managing director of 4490 Ventures. “Becoming data centric using current data management products is too difficult and expensive for 99% of the world’s enterprises. Not only does Fluree take out massive cost elements of becoming data centric, it enables a whole suite of new capabilities that not even the largest companies can build today without storing their data in a platform such as Fluree’s.”
“The biggest organizations in the world are universally experiencing major challenges with storing, securing, and sharing the massive amounts of data generated every day in the enterprise,” said Thiago Olsen, managing director at Engage. “The need to break down data silos and become a data-centric organization is becoming increasingly urgent, and we believe that Fluree’s approach to make data self-securing and portable provides a powerful platform to facilitate this transformation. We are pleased to expand on our partnership and support the growth of the Fluree team.”
“With the advent of Web 3.0 machine-to-machine real-time AI applications, cybersecurity approaches need to move away from only allowing stage-gate access to data to allowing multi-party real-time access to data while still ensuring its integrity, and Fluree’s blockchain-based data platform does just that. Fluree represents a groundbreaking innovation that will power the internet applications of tomorrow,” said Ray Rothrock, former Managing Partner of Venrock and long-time cybersecurity investor who has led early-stage investments in other groundbreaking IT security companies such as Check Point Software (NASDAQ: CHKP, market cap $16B), Cloudflare (NYSE: NET, market cap $11B) and Shape Security (acquired by F5 Networks for $1B).
About Fluree, PBC
Founded in 2016 by Brian Platz and Flip Filipowski, Fluree PBC is a Public Benefit Corporation headquartered in Winston-Salem, North Carolina. Fluree is an enterprise data management platform that guarantees data integrity, facilitates secure data sharing, and powers data-driven insights. The Fluree platform organizes blockchain-secured data in a scalable semantic graph database – establishing a foundational layer of trusted data for connected and intelligent data ecosystems. For more information, follow Fluree on Twitter or LinkedIn, or visit flur.ee. (Source: BUSINESS WIRE)
29 Sep 20. Tetra Tech Acquires BlueWater Federal Solutions to Broaden High-End Technology Service Offerings. Tetra Tech, Inc. (NASDAQ: TTEK), a high-end consulting and engineering firm, announced today that it has further expanded its advanced analytics business with the addition of BlueWater Federal Solutions, Inc. (BlueWater), a leading information technology systems and services firm. Based in Chantilly, Virginia, BlueWater has built a high-performing team of more than 350 employees who bring specialized expertise in cybersecurity, mission-critical systems design, and development and operation of federal enterprise systems for U.S. government clients, including the Federal Emergency Management Agency, Department of Energy, and Department of Defense.
“Our ability to integrate high-end technology and analytics in the delivery of customized water, environment, and sustainable infrastructure solutions is a key differentiator for Tetra Tech in the marketplace today,” said Dan Batrack, Tetra Tech Chairman and CEO. “The addition of BlueWater builds on our strategy to grow our advanced analytics business with expanded capabilities in artificial intelligence, cybersecurity solutions, and mission-essential services for our U.S. federal customers.”
Brian Nault, BlueWater President, said, “Our team is thrilled to join Tetra Tech and work together to expand our capabilities and solutions that solve our clients’ most complex problems. By joining with Tetra Tech, BlueWater creates tremendous opportunities for our employees, expands our reach in the federal market through access to key contract vehicles, and increases the technical capacity and access to resources needed for us to deliver on our customers’ new and changing requirements.”
The terms of the acquisition were not disclosed. BlueWater is joining Tetra Tech’s Government Services Group.
About BlueWater Federal Solutions, Inc.
BlueWater is a leading mission support services provider of Enterprise IT solutions, cybersecurity, engineering, global command and control, and applications development. BlueWater, based in Chantilly, Virginia delivers full lifecycle solutions and modernization for U.S. federal agencies, including the Department of Defense and Intelligence.
About Tetra Tech
Tetra Tech is a leading provider of high-end consulting and engineering services for projects worldwide. With 20,000 associates working together, Tetra Tech provides clear solutions to complex problems in water, environment, infrastructure, resource management, energy, and international development. We are Leading with Science® to provide sustainable and resilient solutions for our clients. (Source: BUSINESS WIRE)
29 Sep 20. Hans Buthkhar, CEO of GKN Aerospace resigned and been replaced by Peter Dilnot, COO of Melrose Plc. In November 2018 Melrose confirmed the appointment of Peter Dilnot as its Chief Operating Officer. Melrose Chief Executive Simon Peckham said on the appointment, “We are pleased to welcome Peter on board as we drive the improvement plans for our businesses and look forward to him joining to help deliver these for our shareholders.”
Hans Buthkhar Joined GKN in 2015 as CEO and Chairman Fokker Technologies and became Chief Executive GKN Aerospace in November 2017.
Prior to joining GKN, he was CEO and Chairman of Fokker Technologies Management Board having been promoted from COO, responsible for the daily operation of the company and performance of Fokker Technologies. Before joining Fokker Technologies in 2006 as president of the Fokker Aerostructures Business Unit, he was Chief Procurement Officer (CPO) of Stork NV, responsible for the total Stork spend of approx. 1.2bn euro, having held various executive management positions. Previous assignments include Managing Director Stork Industrial Modules and Stork Precisie. He holds a degree in Mechanical Engineering and MBA at INSEAD, Fontainebleau.
The source suggested that this appointment is the start of the sale process of GHKN Aerospace prior to the promise by Melrose to keep the business for 5 years in the UK. To maintain this promise, the most likely candidate for purchase is Meggitt which itself is undergoing turmoil in the current depressed aerospace market. A GKN – Meggitt merger would create a global UK aerospace giant of the size required for future markets. The GKN Sinter Metal business is a bigger problem due to reported quality issues of the product and this mat have to be unloaed at a lesser price than the one on the block. That leaves GKN Automotive which is also suffering due to the decline in the automotive market and the switch to electric drive, as well as the loss of a major BMW contract. Again Melrose may have to accept a lower bid, with Dana, the company originally slated by GKN to buy the segment to stave off the Melrose bid, being the likely candidate. The end result will be Melrose having to obtain a much lower return to get GKN off its books and maintain its financial covenants. However, Melrose will become a shadow of its former self after this and may well use the proceeds to go bargain hunting for COVID affected companies.
25 Sep 20. Amentum to acquire DynCorp International. An affiliate of government contractor Amentum will buy DynCorp International, the global services provider, the companies announced Thursday. The deal, for undisclosed terms, is expected to close in the fourth quarter of this year.
In a joint release, the companies billed the deal as creating a mission-critical support services powerhouse, as they have had, collectively, $6bn in revenue over the last 12 months. The new entity would employ 34,000 people in more than 30 countries.
“The combination of our two companies will accelerate our growth into key new markets such as aviation support services, contractor logistics support, intelligence solutions, and training,” said Amentum CEO John Vollmer.
Earlier this year, Amentum launched as a privately held company after the sale of the AECOM Management Services business to affiliates of Lindsay Goldberg and American Securities LLC. The new firm provides mission support and equipment sustainment, information technology, intelligence, nuclear and environmental remediation, among other services.
“We look forward to welcoming DynCorp’s employees to the Amentum family,” Vollmer said. “Our complementary capabilities and cultures will propel Amentum to the top of our market as a leader with differentiated solutions to support our clients’ most challenging missions.”
In April, DynCorp won a $185m, nine-month extension to support Army Sustainment Command in Southern Afghanistan under the Logistics Civil Augmentation Program (LOGCAP) IV contract. The company said it has continuously provided LOGCAP services for the U.S. Army for 11 years.
“This strategic combination of two market leading companies will deliver tremendous value to our customers and increased opportunities for our employees,” said DynCorp CEO George Krivo. Amentum is based in Germantown, Md., and DynCorp is based in McLean, Va. (Source: Defense News)
25 Sep 20. Curtiss-Wright acquiring PacStar for $400m. North Carolina-based defense technology company Curtiss-Wright announced Sept. 24 that it had entered into an agreement to acquire Pacific Star, a major tactical communications vendor for the U.S. Army.
Curtiss-Wright, based in North Carolina, bought PacStar for $400m in an effort to boost its network communications business. According to a press release from Curtiss-Wright, PacStar’s business will operate within the Curtiss-Wright defense business and is expected to generate $120m in sales in 2020.
“The acquisition of PacStar establishes Curtiss-Wright as a critical supplier of advanced tactical and enterprise network communications solutions supporting a broad spectrum of high-priority U.S. military force modernization programs,” said David C. Adams, chairman and CEO of Curtiss-Wright Corporation, in a statement. “The combination of Curtiss-Wright’s mission-critical mobile and secure COTS-based processing, data management and communications technologies with PacStar’s highly complementary hardware and software solutions will enable us to deliver best-in-class platform network integration and tactical data link network management to the warfighter.”
Curtiss-Wright ranked No. 72 in Defense News’ Top 100 annual report on the world’s largest defense companies.
PacStar is an important vendor for the Army’s tactical network modernization effort, where it provides products to improve tactical expeditionary communications. Back in July, PacStar was awarded work to support the fielding of satellite baseband communications to three Expeditionary Signal Battalion-Enhanced (ESB-E) units by Army Program Executive Office Command, Control, Communications-Tactical. PacStar also provides networking and communications capabilities for the Marine Corps’ Networking On-The-Move (NOTM) program.
“PacStar, which represents the largest transaction in Curtiss-Wright’s recent history, is well-positioned to benefit from the military’s continued investment in robust, secure and integrated battlefield network management and is expected to yield significant opportunities for revenue growth,” Adams said. “Further, this acquisition supports Curtiss-Wright’s financial objectives for long-term profitable growth and strong free cash flow generation within our disciplined and balanced capital allocation strategy.” (Source: Defense News)
25 Sep 20. Israel Aerospace Industries Acquires 50% of BlueBird Aero Systems. Israel Aerospace Industries Ltd. (IAI) has signed an agreement to acquire 50% of the equity of BlueBird Aero Systems. Bluebird, a UAS developer and integrator in the small tactical arena, has been providing its solutions to Israeli forces and worldwide customers for close to two decades.
As part of the transaction, IAI is acquiring the holdings of Piramal Technologies SA from India, as well as additional shares from Fiberless Access and Ronen Nadir. Ronen Nadir will continue to hold 50% of BlueBird shares and continue to serve as the company’s CEO.
In recent years, both IAI and BlueBird have focused on vertical takeoff and landing (VTOL) capabilities, a category that provides significant benefits to ground and naval forces. BlueBird has developed several advanced VTOL platforms, including the WanderB-VTOL and ThunderB-VTOL. The company has recently sold more than 70 of the mentioned systems to an undisclosed customer. Together with Bluebird, IAI plans to bring innovative and groundbreaking VTOL technologies to market.
This acquisition is part of the implementation of IAI’s strategy in the UAS sector and a significant potential IAI foresees in the small tactical UAS market for military, HLS, and commercial applications. The acquisition will enable IAI to grow its operations and revenues, accelerate technological developments while lowering costs, reduce time to market process, and improve competitiveness.
CEO of BlueBird Aero Systems, Ronen Nadir, said, “Bluebird brings advanced technological capabilities in the small tactical UAS world and has been fortunate to supply its systems to numerous customers around the world. Along with IAI’s vast technological and innovative abilities and its infrastructure and world market access, we will continue to grow the company and extend its market share. I am delighted by IAI’s decision to become a part of Bluebird and wish to thank the Bluebird team for their support and dedication over the years.”
IAI EVP and General Manager of the Military Aircraft Group of IAI, Moshe Levy, said, “IAI’s UAV experience spans close to 50 years. During this time IAI has focused on customizing its developments to the needs arising from the field and the market. The acquisition of BlueBird is an implementation of this strategy, offering us an important leap forward in developing the next IAI UAV family. The combined companies will offer a broader portfolio of VTOL products with advanced technological benefits at competitive prices.” (Source: UAS VISION)
29 Sep 20. Intellian announces new brand identity. Intellian is proud to announce the launch of its new corporate brand identity. This marks another significant milestone in the company’s evolution from an innovative antenna manufacturer to its position today as a leading technology and solutions provider.
Intellian empowers connectivity for its customers across multiple industry sectors, bringing high-speed data to remote locations and mission-critical environments, connecting people and the world. The company’s rapid growth is testament to its success in being first to market with innovative and reliable products, whilst building enduring partnerships based on trust.
The launch of its new brand is yet another example of how Intellian continues to lead the way. Far from being simply a visual change, it underlines a commitment to continue to evolve, and to explore fresh initiatives to improve both partner and customer experiences. The revitalized look includes a new logo and visual identity, with a strapline of ‘Empowering Connectivity’ encapsulating Intellian’s declared mission objectives. In addition, the company will launch a new website as a central resource for engaging with partners and customers, providing new support tools and more efficient ways of sharing information.
Fundamental to maintaining the great reputation and trust Intellian has built within the industry, an increased focus on the purpose and culture of the global team is a core tenet of Intellian’s clearly defined vision for the future. Culture has been key to the success of Intellian, with agility and creative thinking vital to its customer-centric approach. The new vision and branding paves the way to build on those strengths, as the team expands and engages with customers in new markets.
Eric Sung, CEO, Intellian Technologies, said: “We continue to invest in our business through multiple avenues, including research & development and infrastructure, with the purpose of delivering industry leading products and adding maximum value to our customer experience. Our brand identity launch is a further example of our continued pursuit of excellence in all that we do. Far from changing who we are, our new brand identity is about amplifying what we do best and what has contributed towards us becoming a trusted partner and a global leader. We are excited to enter this next chapter of growth and look to the future.”
The satellite communications industry continues to grow, and Intellian remains committed to being at the forefront of its evolution. Its advanced portfolio and key strategic partnerships are unparalleled within the industry, firmly focused on innovation that solves customer challenges and delivers outstanding value. The design of Intellian’s products ensures optimal performance today, with the agility and flexibility required to give customers the confidence they need to prepare for tomorrow.
The new brand will serve as a foundation for communicating Intellian’s vision with a wider audience, as the company continues to expand into new markets and builds on its success.
More information and the new website may be found at www.intelliantech.com.
About Intellian Technologies
Intellian is a leading global technology and solutions provider for satellite communications, empowering connectivity for the maritime, government, military, energy, cruise and enterprise sectors. Founded in 2004, Intellian is renowned for its innovative design, future-proofed technologies and outstanding customer support, which combined with continued investment in its partners, logistics network, quality control and low environmental impact production facilities make it a trusted enabler within the satellite communications industry. Its bold, pioneering solutions include the award-winning v240MT – the world’s first tri-band, multi-orbit antenna system – and the future-proof NX series antennas, optimized for high performance and low cost of ownership.
Intellian has a global presence with over 400 employees, 12 regional facilities and five logistics centers on three continents. The Intellian 24/7 global support desk provides dedicated assistance to 550 service provider partners and their customers in mission-critical environments. Intellian Technologies Inc. is listed on the Korean Stock Exchange, KOSDAQ (189300:KS).
29 Sep 20. Avantus Aerospace Acquires Fastener Innovation Technologies. Avantus Aerospace, a global leader of C-Class and Composite parts for the aerospace and defense industry, is pleased to announce the acquisition of Fastener Innovation Technology Corporation (FIT) in Rancho Dominguez, California. FIT manufactures unique, high-strength specialty fasteners for military and commercial aerospace applications and has a natural fit with other companies in the Avantus group, including Lamsco and Fastener Technology Corporation (FTC), which was acquired by Avantus in December 2019. FIT, founded in 1979, has built a strong reputation as an innovative and reliable supplier with a broad range of specialty fastener qualifications and, under the guidance of President Larry Valeriano, has expanded their applications to more than 25 aircraft platforms. Some customer relationships span multiple decades, such as those with Boeing (including BDSI), Incora (Wesco), Raytheon, and Lockheed Martin. The existing management team will continue to operate and grow the business under the guidance of Avantus Fastener President Dennis Suedkamp, aided by Avantus’ additional resources.
Avantus CEO, Brian Williams, said: “The FIT team have built an innovative, specialty fastener business with an excellent reputation. We believe our combined strength will allow us to better serve our customers. We look forward to making further acquisitions that complement our existing product and geographic offering.”
Larry Valeriano commented: “FIT’s great customer relationships and long tradition of manufacturing excellence make it an ideal fit for an organization like Avantus Aerospace that shares its values. Together we are well positioned to capitalize on the long-term growth opportunities that lie ahead in the fastener and C Class marketplace.”
Dennis Suedkamp added: “We look forward to enhancing our combined technical and manufacturing resources, while also supporting the development of our employees and the success of our customers.
Avantus Aerospace, is owned by Inflexion and Auctus Industries. Inflexion is a leading European mid-market private equity firm, investing in high-growth, entrepreneurial businesses with ambitious management teams working in partnership with them to accelerate growth. Auctus Industries is a specialist investor in aerospace businesses, focusing on off-market deal sourcing and the execution of buy-and-build acquisition strategies.
Please visit our website to learn more. www.avantusaerospace.com
The purchasers were advised by Goodwin Proctor LLP (Santa Monica), CDS (San Francisco), KPMG (London/Chicago) and Grant Thornton, (Irvine). (Source: PR Newswire)
29 Sep 20. Elbit Systems Announces the Filing of a Shelf Prospectus in Israel. Elbit Systems Ltd. (NASDAQ: ESLT) (TASE: ESLT) (“Elbit Systems” or the “Company”) announced today that it has filed a shelf prospectus with the Israel Securities Authority and the Tel Aviv Stock Exchange (the “Shelf Prospectus”). The Shelf Prospectus is valid for a period of two years and allows the Company to raise from time to time funds through the offering and sale of various securities including debt and equity, in Israel, at the discretion of the Company. Any offering of these securities will be made pursuant to filing a supplemental shelf offering report which will describe the terms of the securities being offered and the specific details of the offering.
The Company has not yet made any decision as to the offering of any securities, nor as to its scope, terms or timing of any such offering, and there is no certainty that such an offering will be made.
Securities, if offered pursuant to the Shelf Prospectus, will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States or to U.S. Persons (as defined in Regulation “S” of the Securities Act), absent registration under the Securities Act or without applicable exemption from the registration requirements of the Securities Act. Any offering of securities pursuant to the Shelf Prospectus and any supplemental shelf offering report, if made, will be made only in Israel, unless provided otherwise in a supplemental shelf offering report, subject to registration or exemption as aforementioned. (Source: PR Newswire)
29 Sep 20. AS&E Announces the Acquisition of Radiation Detection Solutions Business. American Science & Engineering, Inc. (“AS&E”), a subsidiary of OSI Systems, Inc., today announced that it has acquired substantially all of the assets of Nucsafe, Inc., a leading developer of technologies in radiation monitoring and nuclear materials detection using, among other methods, gamma ray and neutron detection, as well as backscatter X-ray. Leading government agencies and industry rely on Nucsafe’s products and services for safety, security and non-destructive testing applications.
In acquiring Nucsafe, AS&E acquires a leading portfolio of radiation monitoring and nuclear detection technologies, Nucsafe’s management and development team headquartered in Oak Ridge, TN, and Nucsafe’s patent portfolio, which includes U.S. Patent 8,300,763, “Spatial Sequenced Backscatter Portal”, an important patent relating to the inspection of vehicles and other objects. The terms of the transaction were not disclosed.
About OSI Systems, Inc.
OSI Systems is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications in the homeland security, healthcare, defense, and aerospace industries. We combine more than 40 years of electronics engineering and manufacturing experience with offices and production facilities in more than a dozen countries to implement a strategy of expansion into selective end product markets. For more information on OSI Systems or any of its subsidiary companies, visit www.osi-systems.com. News Filter: OSIS-G. (Source: BUSINESS WIRE)