General Dynamics Corporation
) has completed the acquisition of Gayston Corporation's defense
operations for an undisclosed amount. The transaction will be
accretive to the company's earnings in 2013.
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Gayston Corporation is a privately held company, which is a
supplier of precision metal components that are used in several
munitions programs. Besides, manufacturing rocket motor tubes for
the U.S. Army's Hydra-70 air-to-ground rocket program, Gayston
provides liners and cartridges for 40mm ammunition rounds and
components for 60-120mm mortar rounds to its other customers. With
approximately 187 employees, Gayston's defense operations operate
at its modern facility Springboro, Ohio, that is optimized for
aluminum impact extrusion manufacturing.
Gayston's defense operations will become a part of General Dynamics
Armament and Technical Products, which is a unit of Combat Systems.
This segment provides high-performance weapon and armament systems,
composite products and heavy-duty off-road axle and suspension
systems to its numerous customers.
The acquisition will expand General Dynamics' critical
manufacturing capability to produce high-precision parts in large
quantities at a lower cost. Moreover, it will provide the company
with more opportunities to chip in for high-performance weapon
Of late, the company is busy making acquisitions to improve its
portfolio. The company recently entered into an agreement to
acquire Fidelis Security Systems, Inc. that will become a part of
General Dynamics Advanced Information Systems. Earlier, it had also
acquired the Ship Repair and Coatings Division of Earl Industries
that became a part of shipbuilding and repair operations of San
Diego-based General Dynamics National Steel and Shipbuilding
Company ("NASSCO"). Prior to that, the company had completed the
acquisition of IPW Holdings, Inc. that became a part of General
Dynamics C4 Systems.
Based in Falls Church, Virginia, General Dynamics engages in
mission-critical information systems and technologies; land and
expeditionary combat vehicles, armaments and munitions;
shipbuilding and marine systems; and business aviation.
General Dynamics' revenue exposure is spread over a broad portfolio
of products and services. Going forward, the company's diversified
revenue structure through exposure to a number of uncorrelated
markets will keep the overall growth momentum steady. Other key
drivers of growth are the company's business jet market, its stable
business of U.S. military vehicles, an ongoing share repurchase
program and strong cash flow generation. At the end of the second
quarter of 2012, the company had cash and cash equivalents of $2.54
billion compared with $2.16 billion at the end of second quarter of
However, the company is largely tied to the U.S. defense budget,
where the threat of budget cuts is looming. Also, we have turned
slightly cautious about the company's risks related to the
execution of key projects. The company presently retains a
short-term Zacks #3 Rank (Hold) that corresponds with our long-term
Neutral recommendation on the stock.
The company mainly competes with
Lockheed Martin Corporation
Northrop Grumman Corporation