General Atomics deal spotlights shifts in federal market

Ten years is a lifetime or two in the federal market. And one of the biggest signs of change has been the divestiture trend that has spread across the space.

Both large and smaller ones are shedding business units to focus on what they consider the core of their business. See my posting on Lockheed Martin.

Another case in point is Ducommun Inc.’s plan to divest Miltec Corp., a company it acquired in January 2006 for $50 million. Today, they are selling it for $14.6 million to General Atomics.

When Ducommon acquired Miltec it said the deal was part of its strategy to move into markets with increasing engineering content. Miltec provides engineering, technical and program management services to defense and intelligence customers. It mostly works on advanced weapons systems and military defense systems. Ducommon primarily provides manufacturing services in the aerospace and defense sector.

But what made sense in 2006 doesn’t make sense in 2016.

“With the sale of Miltec, we are taking another proactive step in focusing our energy, attention and resources on the strategic areas that are core to Ducommun’s growth and financial performance going forward,” said Anthony J. Reardon, chairman and CEO. “We believe that our current portfolio is now better positioned to support our vision to provide unique, value-added solutions and technologies to the aerospace, defense and related end markets.”

In addition to selling Miltec, Ducommun also sold a unit in Pittsburgh that manufactures printed circuit cards for the industrial and energy markets.

But for each divestiture, there also is an opportunity.

For General Atomics, the acquisition is complementary and adds expertise in areas such as hypersonic vehicles, small satellites and related products and programs.

Miltec will become part of the electromagnetic systems group at General Atomics.

The deal also will increase the company’s presence in Huntsville, Ala.

“The integration of these two highly complementary businesses enables GA to strengthen existing relationships and build new ones, and it highlights GA's commitment to delivering the most advanced solutions to meet customer needs,” said Scott Forney, president of General Atomics electromagnetic systems group.

The investment bank KippsDeSanto served as an advisor to Ducommun.