Where Boeing Might Look to Meet Challenges From Acquisitive Competitors

By Paul Ausick Updated Jan 12, 7:59AM EST · Published Sep 20, 12:25PM EDT

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Where Boeing Might Look to Meet Challenges From Acquisitive Competitors — © Thinkstock

The aerospace and defense sector has coughed up a couple of giant mergers in the past few weeks: United Technologies Corp. (NYSE: UTX) is paying $23 billion in cash and stock for Rockwell Collins Inc. (NYSE: COL) and Northrop Grumman is paying $7.8 billion in cash to acquire Orbital ATK Inc. (NYSE: OA). Will Boeing Co. (NYSE: BA) just sit on the sidelines?

Not according to the head of the company’s defense and space business. Leanne Caret is president and CEO of Boeing’s defense, space and security division, and she told CNBC that the defense business is looking for acquisitions.

Caret said she is very focused on growth and that Boeing is “continuing to look at other ways to increase our top line through mergers and acquisitions and we have a continued pipeline we’re assessing.”

Though we’re not sure what a “continued” pipeline is, there might be a clue to where Boeing is looking in a report Tuesday in Aviation Week. In an interview at the Air, Space, & Cyber conference the program manager of the company’s Ground-Based Strategic Deterrent (GBSD) program to supply the Pentagon with next generation intercontinental ballistic missiles (ICBMs) said the company has assembled a supply chain of 22 non-exclusive vendors leading up to a bid on the $5 billion to $7 billion design phase of the GBSD program.

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Boeing’s sole competitor for the contract is Northrop Grumman, and each was awarded a $350 million contract in August to begin preliminary design review work that will result in the design phase contract in 2020.

Lockheed Martin Corp. (NYSE: LMT) also bid on the contract, but the company’s bid was rejected and Lockheed decided not to appeal the decision.

Among Boeing suppliers on the contract are Orbital, Aerojet Rocketdyne Holdings Inc. (NYSE: AJRD) and Moog Inc. (NYSE: MOG-A). Orbital is out of the picture as an acquisition, but Aerojet makes rocket propulsion systems and its market cap of around $2.3 billion is certainly not out of Boeing’s price range.

Similarly, Moog, which makes precision controls and systems for the aerospace and defense original equipment manufacturers, has a market cap of around $2.8 billion.

The total program cost for the GBSD is estimated at between $60 billion and $80 billion. The latest GBSD schedule anticipates a four-year development program beginning in 2020, initial production beginning in 2024 and full production beginning in 2028 or 2029.

Aviation Week noted that the Air Force fires off about four Minuteman III ICBMs every year to prove that the missiles remain capable and effective, but that remaining inventory will drop below 400 around the time full production of the GBSD is scheduled to begin.

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Here’s Boeing’s full list of non-exclusive vendors, according to Aviation Week:

Aerojet Rocketdyne
ARES
Arkham
Bechtel
Black & Veatch
Cummings Aerospace
DESE
Geocent
Green Hills Software
Ierus Technologies
InfoPro (subsidiary of Interfuze)
Interfuze
IroquoiSystems
Kord Technologies
Moog
Orbital ATK
Penta Research
Raytheon
Systima Technologies
University of Alabama (Huntsville)
Victory Solutions
Watring Technologies

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About the Author Paul Ausick →

Paul Ausick has been writing for a673b.bigscoots-temp.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.