BAE nets $2.7B for APKWS guidance units for rocket upgrades

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  March 16, 2020 | International, Aerospace

  Opinion: How New ‘Predators’ Are Reshaping Aerospace Landscape

  By Antoine Gelain Behind the big aerospace and defense (A&D) primes like Boeing and Airbus and the “Super Tier-1s” such as United Technologies (UTC) and GE, a very different type of company is shaping the global A&D industrial landscape in a way that may be even more impactful than high-profile UTC-Raytheon-type mergers. Companies such as Teledyne, TransDigm and Heico are the spearheads of a breed of A&D players dedicated to “components and subsystems,” with explicit and perfectly executed “horizontal” external growth strategies. Their track records are impressive: These three companies—with combined revenues of more than $10 billion—have collectively made close to 200 acquisitions and delivered more than 20% average annual growth rate in either profitability or share value over the last 20 years. Thanks to such returns and skyrocketing market valuations, they are able to outbid most other contenders when going after an acquisition target by leveraging the so-called “accretive effect.” This effect boosts the acquiring company's earnings per share, as long as the price paid for the target as a ratio of the enterprise value (EV) over its earnings before interest, taxes, depreciation and amortization (EBITDA) is lower than that of the acquiring firm. As it happens, the current EV/EBITDA ratio of the three above-mentioned companies stands at more than 18 (see graph). By comparison, most other A&D companies have an EV/EBITDA ratio in the 9-13 range. Such “buying power” is enhanced by operational synergies (for instance, in corporate overheads, sales and marketing), which immediately boost the profitability of the acquired company and can therefore be factored in the offer price. This gives them an additional edge against pure financial investors like private equity (PE) funds, which have historically been strong buyers of such component and subsystem businesses. Two recent deals in Europe (one still ongoing) illustrate this new balance of power. The first concerns Souriau-Sunbank, a $360 million-revenue specialist in interconnection technology for harsh environments. After being owned successively by two PE funds and bought by Esterline (now TransDigm) in 2011, it was again put up for sale last year. While expectations were that a PE fund would grab it, another industrial buyer, Eaton Corp., won the contest, paying the hefty price of $920 million (an EV/EBITDA multiple of 12). The second deal relates to a French company called Photonis, a world leader in night-vision technology for defense and space applications, for which Teledyne is apparently bidding—and offering a price 30% higher than the highest PE bid! These deals highlight the limits of the traditional private equity model (too short-term and too short-sighted) and why the “new predators”—all publicly listed companies—are in a much better position to continue to thrive. In fact, by combining “private equity-like growth in value with liquidity of a public market,” as TransDigm puts it, they are not only beating PE players at their own game, but they are also capturing a significant share of the A&D capital market by offering investors an attractive alternative to the traditional vertically integrated groups such as UTC, Thales or Safran. These groups are typically too busy focusing on large systems and equipment to realize that they would actually benefit from articulating a proper “component and subsystem” strategy. They would benefit not only because their portfolios are still full of such businesses, but also because their long-term competitiveness largely depends on their ability to nurture a strong network of strategic suppliers, in terms of both criticality for their own systems and national sovereignty. As it happens, Photonis seems to be such a strategic supplier, since the current French government just announced it would veto the Teledyne deal, hoping to give other French or European companies or investors time to make a competitive offer for the business. But because PE funds, at least in Europe, are somewhat faint-hearted when it comes to ambitious sector-specific “horizontal” portfolio strategies, and because Europe has no industrial player able to compete with the likes of Teledyne, the outcome of the process is still highly uncertain. In any case, Teledyne, Heico, Transdigm and similar companies are surreptitiously reshaping the A&D industrial landscape by buying technological nuggets and component businesses left and right, on both sides of the Atlantic. In the process, they are boosting their shareholders' returns and changing the balance of power with both traditional private equity investors and large vertically integrated A&D groups. As the saying goes: One man's meat is another man's poison. https://aviationweek.com/aerospace/manufacturing-supply-chain/opinion-how-new-predators-are-reshaping-aerospace-landscape

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  August 28, 2018 | International, C4ISR

  Army announces winners of electronic warfare challenge

  By: Kelsey Atherton A platypus, several Australians and a thundering panda walk into an electromagnetic spectrum, then leave with $150,000. The result is, potentially, a technique and a tool that will allow soldiers to discover what signals in a war zone are relevant to their mission and what are merely noise. The Army Rapid Capabilities Office announced Aug. 27 the winners of the Army Signal Classification Challenge, a competition for artificial intelligence and machine learning with the goal of creating a thinking machine that can accurately classify signals on the fly. Platypus Aerospace, a team from the federally funded Aerospace Corporation, won the event, taking home $100,000. A group of data scientists from Australia competing as TeamAU won $30,000, and a team from Motorola Solutions named THUNDERING PANDA placed third, winning $20,000. These winners beat out a pool of over 150 teams from universities, industry, laboratories and government. The challenge ran from April 30 through Aug. 13. Participants had a 90-day period to develop a model and train on data sets provided by the Rapid Capabilities Office. After that, the models were tested against two data sets ranging in complexity. For the challenge, the Army office said that “the classic signal detection process is no longer efficient in understanding the vast amount of information presented to electronic warfare officers on the battlefield” thanks to the multiplicity of satellite signals, radar signals, phones and other devices transmitting across the electromagnetic spectrum. The understated goal is that the winners' creation is needed not just for a hypothetical future battlefield, or even any of the long-running active theaters where soldiers see combat today. Instead, as noted in the release, “this was the office's first competitive challenge, which grew from the fielding of electronic warfare prototypes to address operational needs in Europe earlier this year.” That “operational need in Europe” may refer to the electronic warfare taking place in Ukraine, which has become something of an open laboratory for both Russia and the United States. Or it might be a broader acknowledgement of the potential threat picture in the region generally. In June, the Army conducted an electronic attack within Latvia as part of a NATO training exercise. The Rapid Capability Office already outfitted the Army with several new electronic warfare tools for countering Russian electronic warfare in Europe, and in July announced that it was bringing those capabilities home to field with a unit stateside. Research into a versatile, flexible artificial intelligence that can find electronic warfare specialists the interesting signals amidst the irrelevant noise is likely to continue. The Rapid Capabilities Office will announce a Phase 2 for the program later this year. https://www.c4isrnet.com/electronic-warfare/2018/08/27/army-announces-winners-of-ai-for-electronic-warfare-challenge

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  November 17, 2020 | International, Land

  Hanwha, Kongsberg team up to bolster Australia’s K9 howitzers

  Brian Kim SEOUL — Hanwha Defense Australia has announced a partnership with Kongsberg Defence Australia to integrate command, control, communication and computing technology into the K9 self-propelled howitzer and the K10 ammunition resupply vehicle. The announcement came two months after the Australian branch of Hanwha Defense, a defense company in South Korea, was selected as the preferred supplier for Australia's self-propelled howitzer acquisition project, code-named Land 8116 Phase 1 Under the project, the Australian Army is to acquire 30 155mm, 52-caliber K9 “Huntsman” howitzers and 15 K10 armored ammunition resupply vehicles, both of which are built by Hanwha. “The selection of KONGSBERG as a central part of our Land 8116 Phase 1 industry team will make a very important contribution to Hanwha's capacity to deliver effective capability for the [Australian Defence Force] while fulfilling our extensive Australian Industry Capability commitments,” Richard Cho, managing director of Hanwha's branch Down Under, said in a statement. The partnership has already proven to be successful, he added, citing their recent involvement in Norway's Vidar program for K9 and K10 procurement, and pointing to their delivery of K9s to Finland and Estonia. Under the partnership, Kongsberg is responsible for the integration of tactical communication systems and battle management systems. “Together with Hanwha Defence Australia, KONGSBERG is committed to the establishment of a sovereign industry capability to support the Australian Protected Mobile Fires capability throughout its service life,” said Joh Fry, general manager of Kongsberg Defence Australia. “We'll continue to source as much C4 hardware as possible through Australian and New Zealand-based suppliers.” Developed by South Korea's Agency for Defense Development and Samsung Techwin in 1998, the K9 Thunder is touted as one of the world's most advanced self-propelled howitzers. It's designed to provide effective and deep fire support across theaters. The howitzer is now manufactured by Hanwha Defense, a defense contractor of Hanwha Group that acquired Samsung Techwin in 2017. The main weapon is the 155mm, 52-caliber gun with a burst rate of fire of three rounds per 15 seconds, and a maximum rate of fire of six rounds a minute for three minutes. It has a firing range of 40 kilometers and is capable of “multiple rounds simultaneous impact” firing. On Nov. 13, South Korea's Defense Acquisition Program Administration announced that the completion of deliveries of K9s to the South Korean military. The announcement came about two decades after the first K9 fleet was deployed on the western border islands of Yeonpyeong and Baengnyeong An upgraded variant, the K9A1, is in production with improvements in fire control and power systems. DAPA and Hanwha Defense plan to continue to improve the K9′s capabilities to add automatic loading and unmanned maneuvering functions. The K9 has been exported to several countries, including Turkey, Poland, India, Norway and Estonia. About 1,700 units are in service around the world, according to Hanwha. https://www.c4isrnet.com/battlefield-tech/c2-comms/2020/11/13/hanwha-kongsberg-team-up-to-bolster-australias-k9-howitzers