ORB Acquires Medium-Class Satelite Business From GDAIS

Analysts at SunTrust Robinson Humphrey maintain their "buy" rating on Orbital Sciences (NYSE: ORB). The target price for ORB is set to $23.

Orbital Sciences is purchasing the satellite business of GD Advanced Information Systems, a subsidiary of General Dynamics (NYSE: GD) for $55 million in cash, which should generate approximately $50 million in revenues for the former company in 2010. ORB expects the deal to close in early April. The company has increased its annual addressable market by about $900 million, while adding substantial manufacturing capacity. ORB also intends to expand and strengthen its customer base while deepening its mission area knowledge in certain national security and civil government satellite applications.

“Given the future growth potential of medium-class satellites (500 kg- 4,000 kg), the strategic niche the acquisition fills, and the cost of organically developing a medium-class satellite (vs. acquisition), we believe this deal represents a compelling value and with a $375 million cash balance, an appropriate allocation of ORB’s cash…In 2011, it should generate around $100 million in revenue which we believe could yield approximately $0.08-$0.10 in EPS…At $55 million, we believe the deal price represents a compelling value vs the cost estimate to organically develop medium-class satellite capabilities i.e. $75 million,” Sun Trust Robinson says. More Analyst Ratings here