In what has to be hands-down the biggest development in defense news this week, Saudi Arabia just asked America to sell it 15,000 rockets.
More precisely, 15,699 rockets.
Or even more precisely:
- 9,650 of Raytheon's (NYSE:RTN) BGM-71 2A Tube-launched, Optically tracked Wire-guided (TOW) Radio-Frequency (RF) missiles
- 4,145 BGM-71 2B TOW Aero RF missiles
- 1,000 BGM-71 2A TOW missiles
- 750 BGM-71 2B TOW missiles
- and an assortment of 154 "fly to-buy" TOW2B and TOW2A missiles.
The U.S. Defense Security Cooperation Agency (DSCA) notified Congress of the planned arms sale on Thursday and, by law, Congress now has 15 days to either reject or approve the sale. If Congress does nothing, the sale is deemed approved and may proceed. At which point we're going to have to ask... at whom, exactly does the Royal Saudi Land Force plan to point these missiles?
Are there 15,000 tanks lumbering around somewhere in the Middle East, that Saudi Arabia wants to blow up? Or is there just one tank out there that's bugging them... and the Saudis are just really bad shots?
Opinions on the question probably differ. According to Middle East news organization Al-Jazeera, for example, the entire nation of Israel owns fewer than 4,000 tanks. Iran has less than 2,000. Most of the tanks in Iraq, the Saudis' usual sparring partner, have already been blown up... although Iraq has embarked upon a multibillion-dollar spending spree to rebuild its armed forces with dozens of M1 Abrams tanks and Stryker APCs from General Dynamics (NYSE:GD).
This still all adds up to fewer than 6,000 tanks for the Saudis to shoot at, however. So while according to DSCA, the express purpose of this sale is to "support the Ministry of the National Guard's defense and counter-terrorism missions," you have to wonder if a few (or more than a few) of these missiles might not somehow find their way into the hands of the combatants fighting to overthrow the regime of Bashar al-Assad in Syria.
For the time being, this is all just speculation. One thing's for certain though: If this deal goes through, it will mean well in excess of $1 billion in revenues for the manufacturer of the TOW: Raytheon. That's more than 4.4% of the company's annual revenues.
With Raytheon earning a net 8% profit margin on these sales, this deal is good news for Raytheon's shareholders -- whomever the Saudis point their new missiles at, or even if they point them at no one at all.
Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of General Dynamics and Raytheon Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.