Worry about a dirty bomb or similar threat to homeland security remains a top US priority, as much under President Elect Obama as under President Bush. In 2006, Congress set a deadline for the US Department of Homeland Security to scan or screen 100% of the cargo coming into the United States. Reports ran across US media outlets a few weeks ago that DHS would not meet that goal.
As technology struggles to keep up with a changing threat environment, start-up companies have sprung up offering new solutions for border and port security. The proliferation of solutions provides opportunity for technology consolidation over the next several years, according to Steven Oesterle, CEO of Decision Sciences. The integration will likely be driven by a desire for a single, integrated solution that can be sold to the Department of Homeland Security and international customs agencies.
Industry sources pegged four companies: Billerica, Massachusetts-based Passport Systems; San Diego, California-based Decision Sciences; Charleston, South Carolina-based Port Security International; and Torrance, California-based Rapiscan as likely targets. Sources also identified mid-market sensor firms such as listed ICx Technologies as possible targets.
An industry analyst said security inspection equipment maker Rapiscan, a division of OSI Systems, could be a possible target. The analyst noted that OSI itself has been a rumored break-up candidate. Rapiscan has roughly USD 250m in revenues, he added. The company makes security inspection equipment used in baggage handling operations and cargo inspection, and for screening people at airports, government buildings, and sea ports. The company did not return calls seeking comment.
The other three potential targets have their own unique capabilities for cargo screening. Passport Systems uses isotopic signatures to determine the exact contents of a container, down to the grade of steel or Uranium isotope, without opening the container. Decision Sciences watches the motion of particles within a container to determine whether it has nuclear materials aboard. Port Security installs and assembles screening systems.
Executives at all three companies have previously indicated to this news service that they expected to exit or receive acquisition interest sometime in the next one to two years.
Likely acquirers include the defense prime contractors, said one industry executive. Another industry executive identified Smiths Detection, a UK-based engineering firm, and China-based NUCTECH, as two of the largest players. Smiths is a likely consolidator in the market, said the executive. SAIC and L-3 Communications also have presences in the market.
"Ultimately, it's a government market. Government policy will drive activity," said one executive.
by Charles Rice, Kevin Nafziger, and Richard Tekneci
Keywords: Border Security; Cargo Screening; Sensor Systems
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