UAV maker United Industrial Corp a good fit for Textron

Defence contractor Textron Inc has reported that it plans to acquire unmanned aerial vehicle (UAV) manufacturer United Industrial Corp (UIC) for $1.1 billion. It is expected to complete the acquisition by the end of the year, pending the required approvals.

The attraction of UIC for Textron would lie in the dependency that the US military has developed for unmanned spy planes, in its efforts to reduce casualties in two intractable wars in Iraq and Afghanistan. The UIC''s Shadow drone is extensively deployed in both the theatres.

UAVs are among the fastest-growing segments of the aerospace industry, but only a handful of companies manufacture them. They now want to expand their application into commercial and domestic markets, including border, maritime and port security.

Last year, AAI purchased Aerosonde, an Australian firm that has contracts with the US government to fly its drones in commercial airspace. Its UAVs have flown through tropical storms and taken pictures for the National Oceanic and Atmospheric Administration. The General Atomics'' Predator drone, a competitor to the Shadow, has patrolled the US-Mexico border for the Department of Homeland Security.

The 57-year-old UIC has dabbled in several industries but clicked in defence, when its focus on unmanned flight made it a technological linchpin in the post-9/11 wars. In the last five years, its revenue has more than doubled to $564 million for 2006. UIC operates mainly through its wholly-owned subsidiary, AAI Corp.

UIC''s 2,500-strong workforce will be integrated into a Textron group that works with the defence, homeland security and aerospace markets. In fact, the combination with Textron will help UIC''s business to expand, said a company representative.

Textron produces Bell helicopters, Cessna aircraft, golf carts, auto parts and surveillance systems. The company reported revenue of $11.5 billion for 2006.
Under the agreement, United Industrial shareholders get $81 a share in cash.

Company representatives said it has been difficult for a company of UIC''s size to effectively compete for government contracts, most of which favour much smaller or much larger companies. Consequently, a lot of UIC business is subcontracting for other companies like Boeing.

UIC was almost sold several years ago, when activist investor Warren G Lichtenstein, a major shareholder and present chairman of the board, threatened a battle for control unless the management agreed to sell the company. But after a year and one or two near-successful deals, the company said it was no longer for sale. Instead, it sold its transportation division, its Detroit Stoker Co energy business, and concentrated on its AAI subsidiary.

United Industrial also repairs helicopter engines and designs factory test equipment for aircraft and satellites. But over half its business is UAVs. Its unique ''One System'' console enables the Army to control a number of UAVs from a single video console, regardless of whether the drone was built by AAI or a competitor.

Textron has had its eye on AAI for years, since the company had helped Textron to develop Eagle Eye. This first-ever unmanned tilt-rotor aircraft combines the vertical lift of a helicopter with the speed and range of an airplane.

The Shadow, manufactured by UIC''s principal subsidiary AAI Corp, has flown more than 200,000 hours. Each of the 18 US Army brigades in Iraq and the two brigades in Afghanistan has four drones, with hydraulic launchers and air-conditioned trailers that contain the UAV operating stations.

The Shadow is a symbol of technologically superior military that former Defence Secretary Donald H Rumsfeld had said could overwhelm opponents with much fewer soldiers. Drones are considered a key ''force multiplier'' in the Iraq and Afghanistan wars, which have no front lines and hard-to-pinpoint insurgents.

The Army says that the spy plane was developed in a record 33 months because the need for it on the battlefield was so great that the bureaucracy was not involved in its development.

What sets the Shadow apart is that it is directly controlled by ground combat commanders, and puts fresh tactical intelligence to immediate use in the field. Before the Shadow, ground commanders had little access to overhead imagery from drones. Most UAVs were Predators, piloted by Air Force personnel from Nellis Air Force Base in Nevada, in the US. Predator imagery was sent by the Air Force to senior military command headquarters, and reached ground commanders only much later.

A typical brigade has about 3,500 soldiers and covers several hundred square miles. When there''s a Shadow flying overhead, its intelligence ''feed'' comes directly to brigade headquarters. This enables the unit to have what the military calls a "staring eye" over this large space. The imagery and other data go directly to the combat commander who is making decisions about how and where to deploy the forces.