Drone maker AAI acquires Australian competitor

Hunt Valley company seeks wider market

June 23, 2006|By ALLISON CONNOLLY | ALLISON CONNOLLY,SUN REPORTER

Hunt Valley-based AAI Corp. is expanding the market for its unmanned aerial vehicles beyond the U.S. government with the purchase of an Australian company.

AAI, a subsidiary of United Industrial Corp., announced yesterday that it paid $6.5 million in stock for privately held Aerosonde Pty Ltd. and Aerosonde North America Inc., which has sold UAVs to military and civilian customers in Australia, Asia and North America.

AAI is best known for its Shadow Tactical Unmanned Aircraft Systems, a fleet of remote-controlled aircraft used by the Army to conduct surveillance and gather intelligence.

Last week, the Shadow program surpassed the 100,000 flight-hours mark in Iraq.

While the Aerosonde purchase is not expected to have any immediate impact on United Industrial's earnings, AAI and Aerosonde are bidding on a candidate UAV system for the Marine Corps, the company said.

Aerosonde is "a perfect fit for our blueprint of strategically expanding our unmanned aircraft systems capabilities to meet the growing and diversified requirements of military, homeland security and civilian markets," Steven E. Reid, AAI's vice president of Unmanned Aircraft Systems, said in a statement.

AAI may pay more for Aerosonde if certain milestones are met, the statement said. Neither company provided further comment yesterday.

Analyst Michael Lewis of BB&T Capital Markets said the acquisition is very much in line with the company's attempt to diversify. Until now, AAI has been heavily concentrated in Army contracts. Last year, 87.1 percent of United Industrial's revenue came from the U.S. government, according to its annual report, leaving it vulnerable to fluctuating budgets.

"They want to be able to say to their customer, `We're not just a one-show pony,'" Lewis said.

AAI sells smaller UAVs used for surveillance, as opposed to larger drones like the MQ-1 Predator, which has a 48.7-foot wingspan and is equipped with Hellfire anti-tank missiles that can remotely attack targets. There is a wider market for the smaller UAVs beyond the battlefield, Lewis said.

Aerosonde's UAVs have been used by the Australian government for peacekeeping missions in the Solomon Islands and the U.S. National Oceanic and Atmospheric Administration for an upclose look at Tropical Storm Ophelia last September. The company can control its vehicles via satellite.

While the Federal Aviation Administration has made it difficult for such companies to sell UAVs to police departments and commercial customers in this country, Lewis said, it could prove to be a lucrative market in the future. Homeland Security Secretary Michael Chertoff has said he wants UAVs to patrol U.S. borders as part of the government's crackdown on illegal immigration. Last summer, Aerosonde received FAA approval for a test mission for the Australian defense force out of Fort Dix, N.J.

The purchase marks AAI's first overseas. In April, parent United Industrial bought a U.K.-based firm that makes aircraft training simulators.

United Industrial shares closed up 25 cents at $47.43 in trading yesterday on the New York Stock Exchange.

allison.connolly@baltsun.com

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