ATK Targets New Customers with Swales Acquisition

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WASHINGTON — Alliant Techsystems (ATK) expects swift approval of its plan to purchase Swales Aerospace and fold the 900-person spacecraft manufacturing and engineering services firm into its Baltimore-based Mission Systems Group.

Jack Cronin, president of ATK’s Mission Systems Group, predicted in an April 4 interview that the deal would close within a month and give his group a much-needed boost of space systems engineering talent as it goes after new national security and civil space work.

“What this does for us, number one, is add a profound technical capability in systems engineering,” Cronin said. “Number two, it substantially expands our customer reach, especially with the intelligence and military customer, where Swales already has a substantial number of people with the highest levels of clearance.”

Swales Aerospace builds small satellites and spacecraft components and provides engineering services to NASA, the Defense Department and other U.S. national security agencies. U.S. government regulators and the majority of shareholders at employee-owned Swales must approve the deal.

If approved, Cronin said Swales would lead the Space Division with ATK’s Mission Systems Group, a $1.2 billion operation with 4,900 employees largely focused on guided missiles and other advanced weaponry. The Space Division, which purchased three small- to mid-sized firms in the last several years, produces spacecraft structures, deployable booms, antennas, propulsion systems and other components.

Cronin said adding Swales capabilities to the mix would enable ATK’s Mission Systems Group to offer customers complete satellites minus the instruments.

“It means we can begin to offer our customers like Orbital Sciences, Lockheed Martin and others substantially better value and more highly integrated systems than we do today,” Cronin said. “Outside of the payload, they can come to us for just about everything they will need for the bus,” he said.

Cronin said Swales Chief Executive Officer Michael Cerneck would lead the expanded Space Division from Swales current location.

The April 3 merger announcement came less than a week after Swales learned that it had lost a long-standing NASA engineering support contract to rival SGT Inc. of Greenbelt, Md. Swales initially lost the contract in December, but a protest filed by the company prompted NASA to rescind SGT’s $400 million award and re-evaluate both offers. But even after taking another look, NASA’s Goddard Space Flight Center decided to stick with SGT and notified both companies of its decision March 30.

The contract, known as Mechanical Systems Engineering Services IIA, provided work for roughly a third of the Swales’s 900-person work force, company officials said earlier this year.

Even without the Goddard contract, ATK is still projecting that acquiring Swales will add about $100 million in additional annual revenue to the Mission Systems Group’s balance sheet in 2008, Cronin said.

“The fact that they had lost this contract is something we had put into our calculus very early in terms of our expectations of what we are buying and the economics of the deal,” Cronin said. He did not say what ATK would pay for Swales, but he said that Swales employees who might otherwise worry about what the Goddard contract loss would mean for their jobs, should take comfort in the merger.

“If I were a Swales employee, I would be thrilled,” he said, noting that Swales’ “engineering bench strength” was one of the company’s main attractions.

Swales disappointment in losing the Goddard support contract was tempered by other successes the company has had this year.

February saw the successful launch of NASA’s Time History of Events and Macroscale Interactions during Substorms (THEMIS) mission, a cluster of five identical science satellites built by Swales. The THEMIS probes were the first Swales-built satellites launched into space since NASA’s Earth-Observer 1, an experimental remote-sensing satellite launched in 2000 and still in service today.

Swales also is building for the Pentagon an experimental satellite called TacSat-3, which is slated to launch late this year atop a Minotaur rocket from NASA’s Wallops Flight Facility on Virginia’s Eastern shore.

The TacSat spacecraft series is a poster child for so-called Operationally Responsive Space, an initiative that Cronin said ATK is eager to support. Buying Swales, he said, should help raise ATK’s profile in that arena. “They are a leader in [Operationally Responsive Space], an area we think it extremely important going forward,” he said.

He said once the deal closes, the Swales-led Space Group would be put to work on a cargo module ATK is under contract to build for Rocketplane Kistler, an Oklahoma City-based company receiving financial assistance from NASA to develop a reusable rocket capable of re-supplying the international space station.

“That cargo module is the kind of thing these people know how to do, so we will be assigning that to them,” he said.