Defence

Google defends thin strip of moral high ground

4 June 2018

Facing a staff revolt, the company will stop developing AI to help military drones identify targets. It leaves a bigger chunk of multibillion-dollar tech defense spending for the likes of Amazon and Oracle. But Google’s ethical choices aren’t as clear-cut as they seem.

China brings a gun to its U.S. trade gunfight

4 April 2018

Beijing proposed duties on $50 bln of American exports hours after the U.S. said it would tax the same value of Chinese exports. Doing so may hit China’s economy, but that’s the point. The readiness to go toe-to-toe implies Trump’s trade war will be neither good nor easy to win.

Melrose wins battle for GKN, UK M&A may be loser

29 March 2018

The takeover specialist's 8 billion pound bid for engineering group GKN has won the day. It now needs a turnaround plan that squares with pledges that were made to placate politicians. And potential bidders for other UK companies know they face a more interventionist government.

Kim Jong Un’s change of heart might be for real

28 March 2018

The despot is acting suspiciously nice, mending fences with Seoul and Beijing and warming to U.S. President Trump. This could be another ruse to lift sanctions. Yet there are reasons to believe a more secure Kim is ready to start turning North Korea into a more normal country.

Dana keeps GKN defence hopes alive

26 March 2018

The U.S. car parts maker raised its cash and shares offer for GKN’s auto unit by $140 million to thwart Melrose’s bid for the whole UK engineering group. The extra cash only compensates for recent falls in Dana’s share price. But given how tight the race is, any increase helps.

Defense M&A fight pits poor David against Goliath

19 March 2018

CACI’s $7.2 bln bid for CSRA is 8 pct higher than the agreed deal General Dynamics struck last month. Neither offer stacks up financially, relying instead on rising U.S. defense spending. General Dynamics, though, has deep pockets and is paying all cash. Felling it will be hard.

Asian defence firms can exploit local insecurities

16 March 2018

Beijing is cranking up military spending and other regional governments are gunning up as the U.S. security umbrella frays. Manufacturers like Korea Aerospace, Japan’s Mitsubishi Heavy and even China's AVIC are ready to take a bigger bite of a $160 billion regional weapons market.

Melrose shows cool head in battle for GKN

12 March 2018

The takeover specialist has raised its cash-and-share offer for the UK engineer by just over a tenth to 7.9 bln pounds. The improved bid may not be enough to compete with GKN’s break-up strategy. But if Melrose prevails, it will do so without undermining its own buyout criteria.

Melrose can afford to hike GKN offer by a tenth

9 March 2018

The acquisitive UK engineer must raise its 7 bln pound bid to stand a chance of success. On past deals it has more than doubled its investment in five years. It could pay 10 pct more for GKN and just about clear that hurdle – if growth is robust and performance precise.

Rolls-Royce’s cash engine roars into life

7 March 2018

The UK aerospace group churned out 273 mln pounds of free cash in 2017, more than twice what analysts expected. It should do even better this year. Boss Warren East has been understandably stingy with dividends after profit warnings and a bribery scandal. Expect that to change.

GKN’s flawed defence is still good enough

14 February 2018

The besieged UK engineering group pledged to sell assets and boost margins. A hurried sale of its best asset is regrettable. But new chief executive Anne Stevens’ profit targets are credible and ambitious. That gives her a chance of fending off hostile bidder Melrose.

General Dynamics pays paranoia premium for CSRA

12 February 2018

The U.S. defense group is spending some $6.8 bln for cyber specialist CSRA. The synergies don’t quite cover the premium, and returns look underwhelming. The deal hangs on a big boost in U.S. government spending, and the idea that these companies benefit from a more fearful world.

GKN breakup defence is still on drawing board

12 January 2018

The UK engineer grappling with an accounting scandal rejected a $9.5 bln offer from serial acquirer Melrose. Its alternative plan of splitting itself in two makes sense and could deliver more value. But investors need more proof it can fix its business, and a clearer timetable.

Britain brings the gloom to global defence party

13 November 2017

Shares in Ultra Electronics fell by almost a fifth after a profit warning due to UK project cancellations and delays. It is a rare sour spot in a sector that has rallied this year. With UK spending tight, mid-market defence groups might face foreign invasions of their own.

Northrop plays on global angst with $7.8 bln deal

18 September 2017

The drone and B2 bomber maker is going ballistic by buying missile and satellite maker Orbital. Cost savings fall short of covering the all-cash deal’s premium. But with tensions growing over North Korea’s nuclear threat, the target’s interceptor business may be set to rocket.

Qatar jet deal a win for BAE but a loss for London

18 September 2017

A deal to buy Typhoon fighter jets will secure thousands of UK manufacturing jobs. But building stronger defence ties with the sheikhdom is a risk when its squabble with Saudi Arabia is unresolved. That could backfire if the kingdom reacts by vetoing a London listing for Aramco.

Cobham’s repeat cash call shows danger in defence

2 March 2017

The troubled British military electronics maker is anything but defensive. After reporting a full-year loss it has unveiled plans to raise 500 mln pounds through its second rights issue in a year. Despite hopes for higher spending on armaments, a recovery could be elusive.

Pilot error poses biggest risk to Thales ascent

28 February 2017

A successful restructuring has left the French defence and aerospace group well positioned to benefit from any increase in governments’ defence spending. The biggest hazard is that growing financial strength may tempt boss Patrice Caine into value-destroying big-ticket M&A.

Trump wraps U.S. budget flaws in $54 bln flag

27 February 2017

Boosting military spending by that sum largely at the expense of diplomatic soft power may please ardent supporters. Fixing Defense Department mismanagement would be wiser, though, and avoid a clash in the president's own party. Jingoism risks bringing higher costs in many forms.

Russia austerity budget is no antidote to low oil

2 November 2016

Moscow wants to freeze spending to cut the country’s deficit amidst a low oil price. Yet the three-year budget doesn’t tackle Russia’s dismal growth, or wasteful spending on damaging conflicts. And President Vladimir Putin may not stick to the cautious plan.