By Calvin Biesecker
Hoping to build off its current technical capabilities, Alliant Techsystems [ATK] is looking at potential acquisition candidates that could cost it upward of $2.5 billion to expand its business into a new market channel, such as commercial aerospace, an international presence in satellite or space programs, or even alternative energy, the company’s top executive told reporters yesterday.
Any acquisition target above $500 million would likely be enough to open a “fourth lane” of business for ATK, Dan Murphy, chairman and CEO of the $3.6 billion defense and space company, said. The company is highly dependent on the U.S. government for the bulk of its sales, Murphy said, indicating a new market channel in the commercial or international space is desirable.
ATK’s main market channels now are ammunition, launch systems, and mission systems, which consists of its systems integration, advanced weapons and satellite development business. Murphy outlined several potential new market channels, any of which would build off current capabilities ATK already has.
One potential opportunity is finding an acquisition in Canada or overseas that would allow ATK to develop and supply satellites or satellite systems to countries that are beginning to demand capabilities in space for communications and weather observation, Murphy said. Companies in the United States are currently prohibited from selling satellites and related systems to many of these countries, such as Thailand and Malaysia, because of export restrictions on these technologies, he said. ATK would be able to avoid U.S. laws here if it had an overseas presence developing satellite or space technologies, he added.
“There is a significant market” for these satellite technologies overseas but “we can’t participate” for now, Murphy said.
Another new area for a potential large boost in ATK’s business is commercial aerospace. The company actually is already participating in this market through its composites expertise. ATK is making the fan containment case for General Electric‘s [GE] new GEnx aircraft engine that will power Boeing‘s [BA] 787 and 747-8 commercial aircraft. Previous fan containment cases made of titanium weigh 600 pounds more than ATK’s composite solution, Murphy said.
ATK is also providing advanced manufacturing help to various companies who are supplying Boeing with parts and systems for the 787 program, Murphy said. When Boeing initiated the 787 program a few years ago and asked its suppliers to participate in the development of the aircraft, ATK didn’t have the cash at the time to participate and support the other parts of its business, he said.
Now, at little cost to ATK, it is finding a way to participate, he added.
Murphy mentioned that he would like to buy Ball Aerospace if Ball Corp. [BLL] were willing to part with that segment of its business.
ATK is already talking with other aircraft engine makers about what it can do for them with composites, Murphy said.
The alternative energy market could also be leveraged through ATK’s experience with advanced composite materials, Murphy said. The company is already supplying 40-foot composite centrifuge tubes used in nuclear power plants, which is itself a growing industry, he said.
ATK has also begun supplying ceramic parts for industrial gas turbines built by Siemens [SI] and Westinghouse for power generation, Murphy said. He sees opportunities for the ATK with its current capabilities, combined with acquisitions in the advanced materials arena, supplying companies who are building new power generating systems based on solar, wind and nuclear energy.
As for the size of acquisitions, Murphy said the company is looking at deals below and above $500 million, including in the $2 billion to $2.5 billion range, which would be the largest in the company’s history.
Along the lines of growing ATK’s international presence, Murphy would like to begin setting up shop in Europe, the Middle East, Asia and possibly elsewhere. Right now the company’s doesn’t have its own business development personnel operating full time overseas, but this will have to change as it sets its sights on growth international growth. ATK’s advanced weapons business, which includes the Advanced Anti-Radiation Guided Missile (AARGM) and the Precision Guidance Kit (PGK), offer the U.S. NATO allies tremendous potential for relative in expensive upgrades to existing munition and missile systems, he said.
PGK is intended to give 155mm projectiles precision strike capabilities by upgrading them with a guidance and control package. AARGM would be an upgrade to High-speed Anti- Radiation Missiles, which are intended to go after anti-aircraft sites that are dependent on radar to alert of incoming aircraft. However, HARM doesn’t work when the enemy shuts down its radar. AARGM is designed to work whether the enemy shuts down its radar or not. Moreover, AARGM will have a guidance and control capability that turns it into a stand-off precision strike weapon that costs less than current stand-off precision weapons, Murphy said.