Defence

KKR finds lucrative new exit: German taxpayers

17 December 2020

The buyout firm is selling 25% of defence supplier Hensoldt to the government, which wants to block foreign buyers. Such trades usually incur a discount, but at $550 mln KKR is getting a rich premium. Dealing with increasingly activist states brings opportunity as well as risks.

BAE’s U.S. pivot can help defuse Saudi discount

20 January 2020

The $27 bln UK defence firm has bought satellite navigation and radio businesses from merger partners Raytheon and United Technologies. The $2.2 bln price looks fair. Greater sales in America, and a lesser reliance on Riyadh, should boost the Typhoon-maker’s depressed stock.

UK defence buyout is Exhibit A for cash glut

25 July 2019

Private-equity firm Advent and Blackstone funds are buying Cobham for 4 bln pounds, larding up to 2.5 bln pounds of leverage onto a company that has worked hard to have essentially none. It suggests both equity and debt investors have plenty of money and limited opportunities.

American M&A makes excess great again

28 June 2019

U.S. deals jumped 19% in the first half even as activity ebbed in Europe and Asia. Topping the list are pricey purchases by AbbVie, Bristol-Myers and Occidental, plus Raytheon’s questionable merger with United Technologies. Most buyers’ owners will regret their CEOs’ ambitions.

Viewsroom: When dealmaking gets difficult

13 June 2019

Raytheon and United Technologies’ planned $114 bln tie-up raises questions about strategy, cost cuts and executive overreach. It’s prompted their shares to tank and activist Bill Ackman to oppose it. And Fiat Chrysler and Renault’s mooted merger has crashed. Can they salvage it?

Saudi Arabia will feel Trump’s Iran slap too

22 April 2019

The U.S. president will fully enforce sanctions on Tehran’s oil exports. Riyadh must pump more to prevent crude prices spiking further, which it has the scope to do. But doing Trump’s bidding will rankle OPEC peers. And the administration has a track record of changing its mind.

UK army contractor’s next target lies overseas

3 April 2019

Submarine-fixer Babcock has hired Ruth Cairnie as its new chair. She inherits a moribund share price and a firm weighted to UK contracts that may wither if the opposition Labour party gains power. Further hiking overseas revenues is the first thing to push for.

Trump’s dubious defense and deficit budget is DOA

11 March 2019

The White House wish list for 2020 tots up to $4.7 trln, with a boost for the military and cuts for most everything else. It also counts on an unlikely 3 pct GDP growth rate to trim red ink over a decade. It’s a statement of position that gives Congress good grounds to ignore it.

Cooler Chinese military spending is cold comfort

6 March 2019

Beijing will dedicate just 5.9 pct of its budget to defence in 2019, after a splurge last year. Yet investments in unconventional weapons, plus a fishing fleet that pushes territorial claims with the help of a maritime militia, will keep the regional arms race simmering.

Bush paid history’s economic dividends forward

1 December 2018

During the 41st U.S. president's one term, Soviet communism fell and Iraq's invasion of Kuwait was foiled. The "kinder, gentler" Bush was the last of a Washington breed that sought compromise. He put country over party. His successors reaped, and then squandered, the benefits.

Army contractor’s best defence is board grenade

13 November 2018

UK military contractor Babcock’s shares fell after an analyst accused it of misleading investors. The group rejects the criticisms, but slowing sales, and the government’s desire to cut costs are worrying. Replacing long-standing Chairman Mike Turner would give some reassurance.

U.S.-China mistrust heightens armed-conflict risk

5 November 2018

A near-collision between American and Chinese naval vessels in the South China Sea is a dangerous sign. Both militaries are stepping up readiness. With trade tensions high and the usual back channels dysfunctional, a clash – or worse – is a concern investors should not dismiss.

Trump’s Saudi arms deal isn’t a jobs offensive

23 October 2018

The U.S. president is urging Congress not to sanction Saudi Arabia by blocking arms sales, saying that could jeopardize 1 million jobs. The deal would probably boost profit margins for Lockheed and others but not do much for employment. Claims to the contrary are largely spin.

$34 bln U.S. defense deal covers all bases but two

15 October 2018

The planned combination of Harris and L3 is a real merger of more-or-less equals with little overlap and CEO succession set in advance. The U.S. government even comes off better. Yet for most stakeholders to win, someone must lose. In this case, it’s suppliers and employees.

Amazon Pentagon ties may receive greater scrutiny

14 August 2018

Donald Trump is no fan of Jeff Bezos. But the U.S government could become an even bigger Amazon client as the Department of Defense seeks pitches for a $10 bln cloud deal. The juggernaut’s slick Pentagon networking could give rivals like Oracle some curious optics to exploit.

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.