General Dynamics Corporation
) entered into a definitive agreement to acquire Fidelis Security
Systems Inc. for an undisclosed amount after receiving approval
from the Board of Directors of both companies.
The acquisition is expected to be completed in the third quarter
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Post acquisition, Fidelis Security Systems will become a part of
General Dynamics Advanced Information Systems, a unit of
Information Systems & Technology ("IS&T") that provides
end-to-end intelligence, surveillance and reconnaissance ("ISR")
solutions across all domains. During the second quarter of 2012,
the backlog was marginally lower year over year for Information
Systems & Technology, but the total potential contract value
for the segment was $31.1 billion, up from $25.3 billion in the
Fidelis Security Systems Inc., a market leader in cyber security
tools, provides real-time network visibility, analysis and control.
Its network security solutions assist customers in recognizing
threats beforehand and thereby prevent them. Moreover, it averts
data breaches by providing visibility into the complex layers of
The acquisition will make the company well positioned to deliver
relevant and innovative cyber security solutions that help
customers respond to dynamic cyber threats. Therefore, both the
companies will focus on advanced threat defense innovation and will
introduce ample opportunities into the market with more and more
comprehensive products that will protect against threats.
The company is busy making acquisitions and boosting its portfolio
in all its segments. General Dynamics recently completed the
acquisition of the Ship Repair and Coatings Division of Earl
Industries. Earl Industries is a leading East Coast ship-repair
company that supports the U.S. Navy fleet in Norfolk, Virginia and
Mayport, Florida. This acquisition will improve the company's
ability to compete in the growing naval ship-repair market.
In June, the company also completed the acquisition of IPW Holdings
Inc., the parent company of IPWireless Inc. IPWireless provides 3G
and 4G LTE wireless broadband network equipment and solutions for
public safety and military customers, and will now be known as
General Dynamics Broadband.
Also, one of the company's peers,
Northrop Grumman Corporation
) agreed to acquire privately held M5 Network Security Pty Ltd, at
Canberra on June 7, 2012. Australia-based M5 Network Security
provides cyber security and secure mobile communications products
and services, and advanced analytics to Australian military and
These acquisitions in various spheres prove that the aerospace and
defense industry is looking forward to strategic acquisitions as
the highest-priority investment area to boost growth.
Particularly, for General Dynamics, the acquisition strategies will
prove to be fruitful for the company going forward. Furthermore,
its business jet market, its stable business of U.S. military
vehicles, an ongoing share repurchase program and strong cash flow
generation are key drivers for the company's growth.
However, we are concerned about the defense budget and 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.
Based in Falls Church, Virginia, General Dynamics Corporation
engages in mission-critical information systems and technologies;
land and expeditionary combat vehicles, armaments and munitions;
shipbuilding and marine systems; and business aviation.