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18 Mar 21. Israel Aerospace posts record profit ahead of planned IPO. State-owned Israel Aeropsace Industries (IAI) on Thursday reported record sales and profit for 2020 as it moves ahead with plans to list a minority stake on the Tel Aviv Stock Exchange.
Israel has long sought to privatise the defence contractor, which last year had sales of $4.2bn in systems that include missile defences, drones and precision-guided weapons, with 71% of them exported.
Net profit grew 48% in 2020 to $133m.
Ministers last November approved the sale of a small stake of the contractor and IAI said that about 25% of the company will be offered to the public.
IAI hopes to carry out the initial public offering (IPO) this year, depending on market conditions, according to a source familiar with the process.
Strong performance in its defence electronics and missiles and space divisions boosted 2020 sales.
The company has also been stepping up conversions of passenger jets to freighters to meet rising demand from a boom in e-commerce and after the value of used planes tumbled during the COVID-19 pandemic.
IAI on Wednesday announced a tie-up with Lithuania’s Aviatic MRO to establish an aircraft maintenance centre at Siauliai Airport to provide maintenance services and convert Boeing 737 passenger jets into cargo planes.
The company ended 2020 with a $12.6bn order backlog, down from $13.5bn a year earlier, which it said secures a little more than three years of operation given current sales volumes.
In the fourth quarter, net profit nearly tripled to $21m while sales were virtually flat at $1.1bn. (Source: Google/https://finance.yahoo.com/news)
18 Mar 21. Dingo Launches Defence division. Dingo, an Australia-based predictive maintenance solutions provider for the mining, energy and rail industries, has announced the appointment of Ron Parrello as managing director to lead its newly formed Dingo Defence division.
Parrello joins Dingo from Rheinmetall Defence Australia, where he held a number of management and program roles over a 10-year period, most recently serving as through-life-support project manager.
“I am excited about the opportunity to lead Dingo Defence to the forefront of predictive maintenance solutions for Defence and defence industry,” Parrello said.
“As an ex-soldier, I am committed to ensuring that our military personnel have the best performing equipment to use on operations.”
In his new role, Parrello has been tasked with supporting Dingo Defence’s engagement with the Australian Army to demonstrate the utility of ‘Trakka’ on vehicles involved in the Protected Mobility Integrated Capability Assurance Program (PMICA).
Dingo’s Trakka product is a cloud-based predictive maintenance system, designed to house asset health data, and drive system predictability, productivity and performance while reducing maintenance, sustainment, and personnel costs.
“Dingo Defence will place industry-leading technology in the hands of Defence personnel to help ensure every system deployed on operations can reliably complete its mission,” Parrello added.
“I am extremely proud to be joining an Australian company with a great product that will create jobs for Australians with the potential for export to global markets.”
Dingo CEO Paul Higgins added: “The Australian Defence Force is a critical part of protecting our nation’s future, and now more than ever technology is at the centre of advanced military capability.
“Defence have indicated that they see significant potential value in applying Dingo’s deep mining asset health expertise to their large equipment fleets across the services.”
Higgins welcomed Parrello to the role, adding that the new appointee is well equipped to support the delivery of new technological solutions to the ADF.
“Dingo has created a very senior role to lead a team to develop and deliver this value over the long term. Ron Parrello will build the Dingo Defence team with the sole purpose of providing Defence Force commanders with accurate, timely machine health insights for improved in-theatre decision making, reduced downtime risk and sense and respond capability,” Higgins said. (Source: Defence Connect)
18 Mar 21. Rheinmetall achieves success in crisis year 2020: Defence secures high sales and earnings level –Automotive makes positive contribution to operating result.
-Consolidated sales down 6% to €5,875m in the year of coronavirus
-Consolidated operating result reaches €426m
-High operating free cash flow of €217m
-Defence: Operating result improves by 21% to €414m, operating margin increases to 11.1%
-Positive despite crisis: Automotive generates operating result of €33m
-Group’s order intake rises by 8% to €8.5bn; order backlog reaches record figure of €13.4bn
-Group’s operating margin comes to 7.3%, after 8.1% in the previous year
-Proposed dividend of €2.00 per share
Outlook for 2021 foresees sales growth and improved margins
-Rheinmetall expects sales and earnings growth in 2021
-Consolidated sales to grow by between 7% and 9%
-Group’s operating margin expected to be between 8% and 9%
New medium-term targets for 2025:
-Consolidated sales in the core business to increase to around €8.5bn by 2025
-Anticipated medium-term operating margin of at least 10%
Rheinmetall AG, Düsseldorf, closed fiscal 2020 with the third-best operating result of the company’s recent history. Despite the critical strain on the business with automotive products, the Group successfully offset the losses from the first half of 2020 in the Automotive sector and generated a positive operating result in 2020 as a whole. In conjunction with the successful business performance in the Defence sector, the Group’s consolidated operating result in 2020 came to €426m. Given the Group’s robust financial position and results of operations, Rheinmetall AG intends to pay the shareholders a dividend of €2.00 per share for the past fiscal year.
Armin Papperger, CEO of Rheinmetall AG: “We are proud that we coped so successfully with the coronavirus crisis in 2020, which was our third-best year in terms of our operating result. Our liquidity did not suffer. On the contrary, we are reporting strong cash flow of over €200 m. This means that we are able to propose a dividend of €2.00 to the Annual General Meeting. And with regard to our markets, we acquired many important orders and increased our order backlog to a record figure of over €13 bn. On top of this come our framework agreements for military trucks and ammunition worth more than €3.5bn.”
“Our successes in the past fiscal year make us extra motivated to usher in a new important chapter in the company’s history in 2021. We are ending the current partition into the Automotive and Defence sectors and placing the Group’s five divisions under the direct leadership of the Group’s Executive Board. By repositioning as an integrated technology group, we also intend in particular to promote technology sharing among the divisions. At the same time, we will practice active portfolio management and concentrate on the business areas with sustainable and value-enhancing potential for growth and earnings. Security technology and electromobility will be of central importance here.”
Group proves resilient in the crisis: Sales and operating result remain at a high level – order backlog reaches a new high at over €13bn.
In fiscal 2020, which was strongly impacted by the global coronavirus crisis, the Rheinmetall Group generated consolidated sales of €5,875m. This meant that sales were down by €380 m or 6% on the previous year; the sales decline adjusted for currency and M&A effects was 5.5%.
That said, fiscal 2020 was characterized by the contrary development of sales in the Automotive and Defence sectors. While the Defence sector increased its sales once again, Automotive’s sales performance was influenced by negative development in the global automotive industry, where production and sales figures in 2020 fell well short of previous years.
At 66%, the international share of consolidated sales in the year under review was lower than the previous year’s figure of 69%.
On December 31, 2020, the order backlog in the Rheinmetall Group was €13.4bn, a new high. This represents an increase on the figure at the end of the previous year (€10.8bn on December 31, 2019) of around €2.5bn or 23%.
In fiscal 2020, the Rheinmetall Group achieved a consolidated operating result (EBIT before special items) of €426m, which was €79m lower than the corresponding previous year result (€505 m). The Group’s operating margin was 7.3%, which was slightly lower than the previous year’s figure of 8.1%.
The operating result in fiscal 2020 was adjusted for special items totaling €337m. These special items mainly related to the non-cash impairment of €300m that was incurred in the Automotive sector as a result of the lower growth momentum in international automotive manufacturing that became apparent in the medium term. The special items also included provisions of €40m for restructuring measures in the Automotive sector. Positive special items of €3m were recognized in the Defence sector, which were due to restructuring measures (€-7m) and a subsequent purchase price adjustment in connection with the sale of a product area in fiscal 2012 (€10m). Taking into account all special items, EBIT in the Rheinmetall Group was €89m, down €422m on the previous year’s figure of €512m.
Earnings after taxes of €1m were €353m lower than the previous year’s figure of €354m. After deduction of earnings attributable to non-controlling interests of €27m (previous year: €19m), earnings attributable to shareholders of Rheinmetall AG were €-27m, compared with €335m in the previous year. This results in earnings per share of €-0.62, compared with €7.77 in the previous year. In fiscal year 2020, earnings per share adjusted for special items amounted to €5.88. On this basis, a dividend payment for fiscal 2020 of €2.00 per share will be proposed to the Annual General meeting, compared with €2.40 in the previous year. This equates to a payout ratio of 34% of adjusted earnings per share (previous year: 31%).
The operating free cash flow generated in the Rheinmetall Group in fiscal 2020 amounted to €217m or 3.7% of sales. It was therefore at the upper end of the target range of 2% to 4% of sales.
Defence: Operating result increases by 21% to €414 m, operating margin rises to a good 11%
In 2020, the business performance with Defence products was again characterized by the high worldwide demand in the military sector and by Rheinmetall’s successful positioning in major markets around the globe.
The Defence sector generated sales of €3,723m in fiscal 2020, exceeding the previous year’s figure by €201 m or around 6%. Taking into account exchange rate changes and M&A activities, organic growth was approximately 5%.
The increase in sales was achieved through, among other factors, the higher supply volumes of Boxer vehicles to the Australian armed forces and the shipment of logistic vehicles (trucks) to the German armed forces. The Vehicle Systems division increased its sales by 2% to €1,823m in fiscal 2020. In the Weapon and Ammunition division, growth in export business and the supply of medical protective equipment led to a sales increase of around 17% to €1,196m. The Electronic Solutions division, on the other hand, suffered a slight dip in sales of nearly 2% to €931m.
Rheinmetall Defence acquired orders of €6,387m in the period under review, after €5,186m in the previous year. This represents an increase of €1,201m, or 23%. The Hungarian armed forces’ order for over 200 units of the newly developed Lynx infantry fighting vehicle amounted to over €2bn and was thus the largest single order on the books. Further orders were also acquired for military logistic vehicles for the German armed forces with a total value of €865m, including special swap body trucks for nearly €300m and other logistic vehicles worth over €450m.
The Defence sector’s overall book-to-bill ratio was 1.7 in 2020 (previous year: 1.5). Each Defence division had a book-to-bill ratio of more than 1, which underscores their future growth potential.
As of December 31, 2020, the order backlog was €12.9bn. Compared with the figure of €10.4bn at the end of the previous year, this represents an increase of €2.5bn or 24%.
The operating result (EBIT before special items) amounted to €414m in fiscal 2020, after the previous year’s figure of €343m. This means that earnings improved by 21%, particularly due to the positive development in the Weapon and Ammunition (+50%) and Electronic Solutions (+23%) divisions, while the Vehicle Systems division’s operating result was at the same high level as in the previous year.
The operating margin in the Defence business therefore increased from 9.8% in the previous year to 11.1% in the period under review.
Automotive: Positive operating result – upward trend in the second half of 2020
In the Automotive sector, the negative impact of the coronavirus crisis left its mark in all relevant markets. The first half of 2020 was particularly affected, with a sharp drop in sales of -34% as a result of the extensive production shutdowns in automotive plants outside China during the second quarter. This was followed by improved business performance in the second half of the year with the gradual restart of global vehicle production. However, the sector’s sales for 2020 as a whole declined by 21% or €585m to €2,151m. Adjusted for currency effects, the decline in sales was 19%. According to the latest market data, global automotive production shrank by over 16% in the same period.
In fiscal 2020, the Mechatronics division’s sales fell by 21% to €1,202m, with the greatest decline in sales with customers in Europe. Sales in the Hardparts division came to €688m and were thus 27% lower than in the previous year. For small-bore pistons, this sales decline was chiefly attributable to the performance of the markets in Europe and North America, whereas large-bore pistons suffered in general from the global weakness in this market segment. In contrast, sales in the Aftermarket division proved largely stable during the crisis and fell by only 4% to €345m.
The joint ventures operated with Chinese partners in China and Germany are accounted for using the equity method and are therefore not included in consolidated sales. The sales of these companies totaled €1,129m in 2020, which corresponds to a decline of 11% year-on-year, or 9% after adjustment for currency effects.
The operating result of Rheinmetall Automotive (EBIT before special items) was €33m in the year under review, after €184m in the previous year. Despite the substantial declines in sales, the Automotive sector managed to generate a positive operating result. This is thanks primarily to strict cost management and an extensive production adjustment program introduced immediately in the early phase of the pandemic. The operating margin in fiscal 2020 decreased to 1.5%, compared with 6.7% in the previous year.
Rheinmetall Group forecast for 2021 and new medium-term targets foresee sales growth and improved margins
In the course of restructuring the Group, the organisational separation of Rheinmetall into two halves, Automotive and Defence, will be eliminated. Therefore the reporting from fiscal 2021 onward will be exclusively at Group and division level.
Based on the current outlooks for the relevant markets, Rheinmetall anticipates growth in the Group’s sales over fiscal 2021 and both an improved operating result and an improved operating margin. The Rheinmetall Group’s annual sales are expected to increase by between 7% and 9% against the previous year’s level in fiscal 2021 (previous year: €5,875m).
Based on this sales forecast and taking into account holding costs, an improvement in the Group operating result and an increase in the Group operating margin to between 8% and 9% (previous year: 7.3%) are expected in fiscal 2021.
Development of divisions and business areas in fiscal 2021
For the Vehicle Systems division, Rheinmetall anticipates a continued growth trajectory for sales, which in 2021 will be supported in particular by shipments of logistic vehicles to the German armed forces and by the Australian Boxer order (pro forma sales 2020: €1,846m). In terms of margin development, on the basis of the planned product mix the operating margin is expected to reach the high level of the previous year (pro forma margin 2020: 8.1%).
In the Weapon and Ammunition division, the German armed forces’ munitions procurement programs as well as sales from international orders are contributing to the continued growth trajectory in fiscal 2021. Significant growth in sales (previous year: €1,196m) and a year-on-year improvement in the operating margin (previous year: 15.5%) are expected for the division in 2021.
For the Electronic Solutions division, Rheinmetall anticipates slight growth in sales in 2021, which will not start to pick up speed until subsequent years with the rise in unit figures for large-volume vehicle programs (pro forma sales 2020: €935 m). The operating margin is expected to be on a par with the previous year (pro forma margin 2020: 9.8%).
In light of the projected market recovery and the envisaged series launch of new products in fiscal 2021, the Sensors and Actuators division is anticipating significant growth in sales (previous year’s sales: €1,202m). On the basis of this higher sales forecast, the division is expecting to see a substantial increase in its operating margin (previous year: 3.0%).
Strong growth in sales is also expected for the Materials and Trade division in fiscal 2021 (pro forma sales 2020: €546m). Based on this growth, the division is also anticipating a tangible improvement in its operating margin (pro forma margin 2020: 5.2%).
The non-core small- and large-bore pistons business is also expecting to see sales pick up, albeit with the growth momentum dampened by the continuing downturn on the large-bore pistons markets (pro forma sales 2020: €479m). In terms of the operating result and the operating margin, a return to positive figures is expected after a loss in fiscal 2020 (pro forma margin 2020: -4.5%).
Medium-term targets for 2025
Looking ahead to 2025, Rheinmetall has set new medium-term targets for sales, earnings and cash flow.
Consolidated sales in the five divisions of the core business are to increase to a total of around €8.5bn by 2025.
The Group’s profitability is to improve by the same date, resulting in an operating margin of at least 10%.
The target corridor for operating free cash flow in 2025 has been increased to around 3% to 5% of sales.
17 Mar 21. Aerovel Raises $2.5m for Flexrotor Development. Aerovel, manufacturer of Flexrotor, an advanced Group 2 vertical take-off and landing (VTOL) unmanned aircraft, announced that it has raised $2.5m in Series B capital. The investment is from undisclosed leaders in aviation.
Aerovel is using the funds to accelerate growth, increase production capacity and hire additional engineers.
“These funds come at an important time in Aerovel’s growth,” said Ali Dian, CEO of Aerovel. “We are seeing excellent interest in Flexrotor from government and private users, and this investment round will enable us to quickly scale. We plan to raise additional funds later this year and more than double in size.”
Flexrotor is designed to operate with economics that are practical for commercial service while being effective for military applications. It can be used day or night for a diverse range of intelligence, surveillance, and reconnaissance on land and at sea. The aircraft offers an unprecedented combination of small size, large payload/range, economy, autonomy and basing flexibility. (Source: UAS VISION)
18 Mar 21. B&R launches into defence industry following Boeing contract. Brisbane based B&R used its Boeing contract to expand into the defence industry. Boeing’s recent agreement with B&R Enclosures for the delivery of racks and brackets has helped the family-owned SME to expand into new sectors, Boeing outlined this week.
Previously, Brisbane based B&R was a producer of cabinets for both industrial and domestic clients. Now, they have had the opportunity to expand into the defence industry as part of Boeing’s Currawong battlespace communications system.
Chris Bridges-Taylor, executive director at B&R Enclosures outlined how the SME has used this contract as a springboard.
“Boeing Defence Australia engaged us to develop brackets for high capacity line-of-sight radio and videoconferencing equipment”, Bridges-Taylor noted.
“That initial piece of work was the foundation for shaping our defence business which now includes a broad range of data and electrical custom enclosure, as well as integration and control solutions.
“The defence industry’s stringent quality and accreditation requirements have escalated our investment in equipment such as robotic laser welding and 3D technology to enhance our physical production processes. We are now recognised for our ability to achieve highly technical outcomes for the challenges of the defence industry.”
Boeing’s Project Currawong employs some 200 Australian businesses throughout the supply chain.
Peter Farquharson, Boeing Defence Australia’s head of industry engagement congratulated the work of SMEs throughout the manufacturing process.
“Our local supply chain provides agility, certainty, and an ability to work at pace.
“In return, the complexity of defence work delivers opportunities for SMEs to build sophisticated manufacturing skills and reap benefits beyond one specific program.” (Source: Defence Connect)
17 Mar 21. Capita to raise £400m in asset sales as pandemic slows recovery. Revenues drop after lockdown measures hit company’s local government contracts. Capita, one of the British government’s biggest contractors, is seeking to raise £400m from asset sales and embark on more restructuring as it warned the pandemic had slowed its recovery. Revenues fell 10 per cent to £3.3bn in 2020 as coronavirus-induced lockdown measures hit local authority contracts and the travel, leisure and events business, where it is paid on the volume of customers served. However, pre-tax losses narrowed to £49.4m compared with £62.6m in 2019 and shares rose 2 per cent to 47.22p by late Wednesday morning as the results were in line with expectations set out at the half-year. The company, which oversees congestion charges in London and collects the BBC licence fee, has launched asset sales after its ambitious acquisition drive forced multiple profit warnings and a £700m rights issue in 2018. The group, which also administers the Department for Work and Pensions’ universal credit scheme and provides security tags for offenders, is also struggling with a debt mountain that stood at £1.07bn in 2020. Jon Lewis, the oil industry executive brought in to pull the business back from the brink of collapse three years ago, is trying to reposition the company as a technology-led consultancy competing with high-margin professional services groups such as Accenture. As part of this move Capita’s chief executive has announced more restructuring measures, splitting the business into two core divisions: public sector, which includes its work for the central and local governments, and customer management, where it provides consulting, call centres and other digital services for clients including Samsung, O2 and Marks and Spencer. The remainder of the business, which includes IT hardware, human resources and insurance companies, will be put up for sale with the aim of raising at least £400m to repair its debt-laden balance sheet over two years. Businesses on the sales block include Axelos, a joint venture with the Cabinet Office, which manages qualifications, and Fera, a scientific research agency that it oversees for the government. Capita sold its education software business last year for a lower than expected £298m. About 85 per cent of Capita’s 60,000 staff were able to work from home during the crisis, but the company also took furlough support from the UK government for about 4,000 workers. It plans to allow employees to work from home most of the time in the future, enabling Capita to recruit from around the country and close down nearly a quarter of its office space this year. Lewis said the company’s cost-saving measures had helped the company get through the crisis, as had some coronavirus-related work for the government. “Capita is a much better business than it was three years ago when we began our transformation,” he said. Outsourcers have had a difficult time over the past few years. Carillion has collapsed, Interserve was taken into the hands of creditors and broken up for sale, while G4S has been taken over by private equity. The companies ran into trouble after a series of problem contracts piled pressure on their debt-laden balance sheets and exposed a failure to properly integrate acquisitions. (Source: FT.com)
17 Mar 21. Integrated Review: defence sector still waiting for clarity.
The government finally published the delayed integrated review, with Trident-exposed defence companies looking like the biggest winners
- The cap on the UK’s nuclear arsenal is set to increase
- More than £6bn will be invested in next-generation R&D
Benefitting from the stability of long-term government contracts and robust demand, defence companies’ earnings have proved relatively resilient in the face of Covid-19 – at least for those with limited exposure to commercial aerospace.
Yet investors have been wary of buying into defence stocks over the past year amid concerns that government spending across the world will be curtailed post-pandemic. In the UK, there has been additional uncertainty as we await the outcome of the integrated review of security, defence, development and foreign policy. The review began early last year, promising “the most radical assessment of our place in the world since the end of the Cold War.” Having been delayed by Covid-19, its findings have finally been published. Under the title of ‘Global Britain in a Competitive Age’, the 114-page document lays out a vision of the UK’s role in a post-Brexit world over the next decade.
In the face of a more fragmented international order, key objectives include:
- Remain committed to European collective security via NATO to counter the “most acute threat to our security” from Russia.
- Pursue deeper engagement with the Indo-Pacific in response to the “systemic challenge” posed by China.
- Invest in research and development to become a “science and tech superpower” by 2030.
- Make tackling climate change and biodiversity loss the UK’s number one international priority.
The biggest news on the defence front centred around the nuclear deterrent, reversing the course of non-proliferation since the end of the Cold War. The UK had been aiming to reduce the cap of its stockpile of Trident nuclear warheads from 225 to 180 by the middle of the decade, but this target has now been abandoned, with the ceiling being lifted to 260 warheads.
The review says that the controversial decision was taken “in recognition of the evolving security environment, including the developing range of technological and doctrinal threats”. The UK could now consider a nuclear response to a non-nuclear threat, such as a chemical, biological or even cyber attack.
Any increase in the UK’s nuclear arsenal will benefit US defence giant Lockheed Martin (US:LMT) which manufactures the Trident II D5 ballistic missiles. At present, they are carried on Vanguard Class submarines, although, as previously announced, these are being replaced by four Dreadnought Class vessels that are being constructed by BAE Systems (BA.), with nuclear propulsion systems from Rolls-Royce (RR.) and other key components from Babcock (BAB).
Difficult trade-offs ahead
With more money being spent on nuclear weapons, that likely means that savings will have to be found elsewhere. While the government did unveil a £16.5bn boost to the defence budget back in November, there will undoubtedly be trade-offs as efforts to modernise the military and introduce “cutting-edge technology” will require scaling back some traditional capabilities.
That’s before accounting for a potential £17.4bn black hole in the Ministry of Defence’s (MoD) 10-year equipment plan through to 2030, which the House of Commons Public Accounts Committee has warned could wipe out the benefit of additional funding. In a report released last week, the committee also pointed to an extra £20bn of cost pressures to develop future capabilities and accused the MoD of being “over-optimistic” about potential efficiency savings.
The Commons Defence Committee has been similarly scathing in its assessment of the MoD, with a report published just a day before the Integrated Review decrying “bureaucratic procrastination, military indecision, financial mismanagement and general ineptitude” over the past two decades. It concluded that the army’s fleet of armoured fighting vehicles is facing “mass obsolescence” and requires significant funding to be upgraded.
But, as the Integrated Review has reiterated, defence spending will pivot towards domains associated with the digital age, such as space and cyber warfare. Indeed, £6.6bn will be invested in next-generation research and development to deliver “an enduring military edge in areas including space, directed energy weapons, and advanced high-speed missiles”.
Professor Peter Roberts, director of military science at the Royal United Services Institute (RUSI), has cautioned that these modernisation efforts shouldn’t be overstated. “Allies and competitors made such big bets 5 years ago,” says Roberts. “This review would have therefore been excellent if delivered in 2016. Today? Worryingly behind the times.”
A waiting game
The review largely rehashed earlier promises on defence, as details on specific cuts and investments are set to be revealed when the Defence Command Paper is published on 22 March.
BAE is the most exposed to cutbacks on expensive platforms and there are reports that the UK will scale back its planned purchases of the F-35 fighter jet. But the group is integral to the Tempest programme and will benefit from Boris Johnson’s promised “renaissance of British shipbuilding”, in particular the commitment to add eight Type 26 frigates to the UK’s naval fleet.
Meanwhile, preparing for the battlefields of the future should bode well for Cohort (CHRT) and Ultra Electronics (ULE) given their expertise in electronic warfare and cybersecurity solutions, and QinetiQ’s (QQ.) testing, training and evaluation services should remain important as the MoD adopts new technology.
Still, all British defence companies should gain from the shift towards self-sufficiency, focusing on domestic industrial capability to fulfil the UK’s technology requirements. The championing of national expertise is part of the government’s wider agenda of levelling up the country and reinforcing the union. (Source: Investors Chronicle)
15 Mar 21. IronNet Cybersecurity, the Leader in Collective Defense and Network Detection and Response (NDR), to Be Listed on NYSE Through a Merger With LGL Systems Acquisition Corp.
- IronNet is transforming cybersecurity through Collective Defense, a differentiated platform that uses AI-driven behavioral analytics to detect new, non-signature-based cyberattacks, such as SolarWinds/SUNBURST.
- IronNet’s unique cloud-based, scalable solution, IronDome, analyzes threat detections across companies within an industrial sector to identify broad attack patterns and provides anonymized intelligence back to all customers in real time.
- This transaction is expected to drive further market adoption of IronNet’s Collective Defense Platform in a growing $25B security segment and accelerate its innovation-pipeline of additional offerings.
- Pro Forma enterprise value of the combined company following the merger is expected to be $927m, implying a $1.2bn pro forma equity value.
- Transaction includes a $125m fully-committed common stock PIPE at $10.00 per share anchored by one of the world’s largest institutional investors with participation from Emles Advisors, Weiss Asset Management, and The Phoenix Insurance Company. Existing IronNet investors Bridgewater Associates, ForgePoint Capital, and Kleiner Perkins will be joined by the LGL sponsor group to also invest in the PIPE, enhancing their long-term commitment to IronNet.
IronNet Cybersecurity, Inc. (“IronNet”), an innovative leader transforming cybersecurity through Collective Defense, announced today that it has signed a definitive business combination agreement with LGL Systems Acquisition Corp. (NYSE: DFNS), a special purpose acquisition company formed to help advance domestic and international defense. The transaction will allow IronNet to accelerate its growth trajectory in the rapidly growing cybersecurity market and to capitalize on strong demand for new and more effective ways to defend against growing cyber threats. Upon close of the transaction, the combined company will be renamed “IronNet Cybersecurity, Inc.” and will be listed on the New York Stock Exchange and trade under the ticker symbol “IRNT.”
“IronNet is unparalleled in its approach to cybersecurity, providing best in class technology applications, critical data, and an experienced management team”
IronNet merges industry-leading cybersecurity products with expert service to create a platform designed to deliver the most advanced, real-time cyber defense globally, protecting both private and public sectors. Bringing together some of the best minds in cybersecurity from industry, government and academia, IronNet was created to more effectively defend enterprises, sectors and nations against highly organized cyber adversaries and increasingly sophisticated attacks that traditional security tools are challenged to detect. IronNet’s Collective Defense platform, which features proprietary and patented technology, detects cyber anomalies and shares anonymized threat data in real time within a secure ecosystem. This provides all Collective Defense members with a previously unachievable level of visibility into potential incoming threats.
“Today marks an important milestone as we work to advance IronNet’s ability to defend enterprises, sectors and nations against highly organized cyber adversaries and increasingly sophisticated attacks. We face the beginning of a digital arms race in which adversaries are using cybersecurity attacks as a tool to wreak havoc, including destruction, intelligence-gathering, and extortion – ultimately presenting an existential economic threat to the public and private sectors. Compounding this problem, organizations frequently must defend themselves, often with limited resources, against well-funded nation state groups who plan, code and attack in teams over long periods of time,” said GEN (Ret) Keith Alexander, Chairman of the Board, Founder and Co-CEO of IronNet.
“Cybersecurity attacks are increasing in volume and are costing global industries billions of dollars annually, as evidenced by the recent global attacks via SolarWinds and Microsoft software. Sophisticated threat actors routinely target private companies’ networks with increasingly swift and complex tactics. Supply chain and zero-day exploits are now part of the everyday business lexicon, and ransomware attacks are targeting life safety critical infrastructure. We believe we can solve that problem with a differentiated solution that leverages AI-driven behavioral analytics to detect attacks and shares that threat data among our customers in real time so they can take action more quickly,” added William Welch, Co-CEO of IronNet.
“IronNet is unparalleled in its approach to cybersecurity, providing best in class technology applications, critical data, and an experienced management team,” said Robert LaPenta, Co- CEO of LGL Systems Acquisition Corp. “As it stands today, current methods of cyber information sharing, analysis, and collective action are simply too manual and too slow to be effective. Our LGL team is very excited to partner with General (Ret.) Alexander, the longest-serving head of the NSA and founder of US Cyber Command, in helping steward his corporate vision to the New York Stock Exchange. We believe this merger will make a real difference in helping IronNet protect our fellow citizens from accelerating aggression by an invisible enemy intent on hurting our well-being.”
IronNet’s Collective Defense Platform consists of IronDefense and IronDome. IronDefense is an advanced Network Detection and Response (NDR) solution that provides behavior-based and AI-driven analytics at the network level to detect anomalous activity at individual enterprises and prioritize the highest threats in a company’s network. The IronDome solution then provides a crowdsource-like environment in which the IronDefense findings from an individual company are automatically and anonymously shared at machine network speed and cloud scale within the group of related entities (portfolio companies, supply chains, industries, or nations) for correlation and further analysis. This real-time visibility to the threat landscape delivers timely, actionable, and contextual insights to the attacks targeting an enterprise and provides early warning to all members.
In addition, IronNet’s professional cybersecurity services, are led by security professionals and threat researchers who have real-world experience with nation-state cyber operations. These customer engagements deliver end-to-end security posture evaluations that enable a customer’s security team to exercise their processes and technologies against a sophisticated but benign adversary, identify new and novel threats in their networks, and discover potential gaps.
IronNet believes that Collective Defense is the future of cybersecurity and takes threat intelligence sharing to an operational level. This one-of-a-kind platform represents a radically different approach to cybersecurity, designed to break down the silos that have made organizations around the world vulnerable to destructive cyberattacks.
LGL Systems Acquisition Corp., which currently holds approximately $173m cash in trust, will combine with IronNet at an estimated pro forma total enterprise value of $927m. Assuming no redemptions by LGL’s existing public stockholders, IronNet’s existing stockholders will hold approximately 72% of the fully diluted shares of common stock in the combined company, IronNet Cybersecurity, immediately following the closing of the business combination.
The combined company expects to receive approximately $267m in net proceeds, assuming no redemptions by LGL’s existing public stockholders, including proceeds from a $125m PIPE transaction. Cash proceeds are expected to be used to accelerate IronNet’s revenue growth, to expand its product portfolio, and for working capital to fund increasing demand.
The transaction has been unanimously approved by the board of directors of both LGL and IronNet, and is subject to the satisfaction of customary closing conditions, including the approval of both parties’ stockholders, expiration of Hart-Scott-Rodino waiting periods and the effectiveness of LGL’s registration statement with the Securities and Exchange Commission (SEC). The transaction is expected to close in the third quarter of 2021.
Additional information about the proposed transaction, including a copy of the merger agreement and investor presentation, will be provided in a Current Report on Form 8-K and in LGL’s registration statement on form S-4, which will include a document that serves as a prospectus and proxy statement of LGL, referred to as a proxy statement/prospectus, each of which will be filed by LGL with SEC and available at www.sec.gov.
Guggenheim Securities, LLC is acting as exclusive financial advisor and capital markets advisor to IronNet. Barclays is acting as exclusive financial advisor to LGL. Barclays, BTIG, LLC, Jefferies LLC and Needham & Company, LLC are acting as placement agents and capital markets advisors to LGL. Cooley LLP is acting as legal counsel to IronNet. Paul Hastings LLP is acting as legal counsel to LGL. Sidley Austin LLP is acting as legal counsel to the placement agents.
Investor Call / Management Presentation
A presentation made by the management team of both IronNet and LGL regarding the transaction will be available today starting at 7:00 AM EST on the website of LGL. To access the conference call, please visit www.dfns.ai or dial 1-844-512-2921 (international 1-412-317-6671) and enter password 1143965. LGL will also file the presentation with the SEC in a Current Report on Form 8-K, which will be accessible at www.sec.gov.
Founded in 2014 by GEN (Ret.) Keith Alexander, IronNet Cybersecurity is a global cybersecurity leader that is revolutionizing how organizations secure their networks by delivering the first-ever Collective Defense platform operating at scale. Employing a number of former NSA cybersecurity operators with offensive and defensive cyber experience, IronNet integrates deep tradecraft knowledge into its industry-leading products to solve the most challenging cyber problems facing the world today.
About LGL Systems Acquisition Corp.
LGL Systems Acquisition Corp. is a blank check company formed for the purpose of effecting a merger with a target business in the cybersecurity, C4ISR, data processing, and/or analytics sectors, with a broad range of applications across the aerospace, defense, and communication end markets. (Source: BUSINESS WIRE)
15 Mar 21. Class Action Filed Against AgEagle Aerial Systems. Pomerantz LLP announces that a class action lawsuit has been filed against AgEagle Aerial Systems, Inc. and certain of its officers.
The class action, filed in the United States District Court for the Central District of California, and docketed under 21-cv-01991, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise, acquired publicly traded AgEagle securities between September 3, 2019 and February 18, 2021, inclusive (the “Class Period”). Plaintiff seeks to recover compensable damages caused by Defendants’ violations of the federal securities laws under the Securities Exchange Act of 1934 (the “Exchange Act”).
AgEagle purports to be a commercial drone company. According to AgEagle’s website, the Company is engaged in the design, engineering, and manufacturing of commercial drones, as well as in providing drone services and solutions to the agriculture industry.
The Complaint alleges that throughout the Class Period, Defendants made materially false and/or misleading because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations and prospects, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that:
- AgEagle did not have a partnership with Amazon and in fact never had any relationship with Amazon;
- rather than correct the public’s understanding about a partnership with Amazon, Defendants were actively contributing to the rumor that AgEagle had a partnership with Amazon; and
- as a result, Defendants’ statements about AgEagle’s business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times.
On October 14, 2020, news broke that Amazon did not have a partnership agreement with AgEagle, and in fact never did. The Wichita Business Journal published a story with the headline:
“Exclusive: Who’s AgEagle’s big customer? We now know who it’s not.”
The article reported that AgEagle was not partnering with Amazon.
On February 18, 2021, Bonitas Research published a report revealing that AgEagle
“was a pump & dump scheme orchestrated by . . . AgEagle founder and former chairman Bret Chilcott and other UAVS insiders to defraud US investors.”
On this news, shares of AgEagle, fell $5.13, or 36.4%, to close at $8.96 on February 18, 2021, damaging investors. (Source: UAS VISION)
15 Mar 21. Italian aerospace firm Leonardo’s electronics unit files for $700m U.S. IPO. Leonardo DRS Inc, the electronics division of Italian defence and aerospace group Leonardo SpA which counts the U.S. military as a customer, filed for an initial public offering of up to $701.8m in the United States on Monday.
The parent company will offer about 31.9 million shares of Leonardo DRS, or a 22% stake in the division, for $20 to $22 per share, the filing showed. It will receive all the proceeds from the offering. The defence electronic division intends to keep future profits for growth and does not anticipate paying a regular cash dividend, it said in the filing. To get ready for the listing on the New York Stock Exchange, DRS in February said it planned to repay $237m of related-party borrowings and issue $450m of new debt. Goldman Sachs, BofA Securities and JP Morgan are the lead underwriters for the offering. (Source: Google/Reuters)
TCI International, Inc., is a wholly-owned subsidiary of SPX Corporation. TCI provides turn-key solutions for spectrum management and monitoring, direction finding, geolocation and communications intelligence to civilian, government, military and intelligence agencies as well as antennas for communications and high-power radio broadcasting. TCI is headquartered in Fremont, California, USA. For more information, visit www.tcibr.com.