Will General Dynamics' bold strategic move for Force Protection pay off?
Posted: 11/16/2011 12:00:00 AM EST
Last week General Dynamics (NYSE: GD) announced that it was set to acquire Force Protection, Inc. (NASDAQ: FRPT) for approximately $360 million (£228 million).
Speaking to Defence IQ today, Rob Doolittle, Staff Vice President of Communications at General Dynamics, stated that the deal will allow the company to increase its traction in the armoured vehicle and survivability products market.
“Our plan is to leverage the combined strengths of FPI and General Dynamics Land Systems to pursue new opportunities (globally),” Doolittle explained in an email interview with Defence IQ.
In the past Force Protection was known for its significant investment in R&D, which was one of the principal factors in driving the firm to be the mid-market leader in survivability. Vernon Joynt, the founder of the South African MRAP project and one of the world’s principal anti-mine experts, was brought on board early to head FPI’s research team. I wanted to know if this commitment to R&D would continue under GD’s control. Doolittle suggested that it would.
“General Dynamics invests significantly in ongoing research and development programs to ensure that we continue to deliver market-leading products to our customers, and we don’t anticipate that changing,” he said.
Singling out one such R&D success, Doolittle said that “the double-V hull that our engineers created for the Stryker combat vehicle,” demonstrates the company’s commitment to developing and implementing innovative survivability technologies. “The new hull design increases blast-protection and crew-survivability levels dramatically,” he said.
With the armoured vehicle market looking unstable in the mid-term, some have questioned the strategic objective behind the deal.
Doolittle looked to clear this up, stating: “Force Protection has good products that are in demand by customers around the world, as well as a significant installed base of vehicles that are deployed in support of military operations by several nations. General Dynamics is pleased to have the opportunity to add FPI’s products to our extensive portfolio of armoured vehicles, helping us be more responsive to customers’ varying requirements; and to be in a position to service, support and reset the installed base of vehicles going forward. In addition, General Dynamics can provide additional products and services to FPI’s existing customer base, and we can offer new products to our own customer base through this acquisition.”
From Force Protection’s point of view it makes sense when you consider the lack of military contracts available for the next few years. Not least is the UK’s FRES (Future Rapid Effects) programme, which General Dynamics was commissioned to start work on last year. It calls for a Scout Specialist Vehicle to be designed and manufactured, incorporating next generation survivability technologies. Force Protection, one would imagine, will now be exposed to working on this FRES project.
Michael Moody, Chairman and Chief Executive Officer of Force Protection, Inc., said, “After careful consideration of the strategic direction of Force Protection, our board decided that a sale to General Dynamics would maximize value for our stockholders. With their armoured vehicle business, General Dynamics will be able to pursue opportunities that we could not have pursued as a stand-alone company. As part of the General Dynamics family, our innovative products and offerings will continue to provide militaries worldwide critical assets that save troops’ lives.”
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