Alliant Techsystems’ [ATK] plans to bolster its capabilities and offerings for the space market took a hit recently when Canada rejected the company’s pending $1.3 billion acquisition of the space and related information systems business of the Canadian firm MacDonald Dettwiler and Associates (MDA).
In a brief letter to ATK dated April 8, Jim Prentice, Canada’s Minister of Industry, said that “I am not satisfied that your investment is likely to be of net benefit to Canada.” Prentice said the company has 30 days to respond, although this period could be extended based on negotiations between ATK and the ministry.
At the end of the 30 days, Prentice said he will issue a decision once again if he is satisfied or not as to whether ATK’s acquisition is of net benefit to Canada. If Prentice maintains his current stance, it would be the first time Canada has blocked an acquisition by a foreign company.
ATK said yesterday it remains in discussions with the Canadian government. JP Morgan aerospace and defense analyst Joseph Nadol said in a note to clients that “ATK believes that this initial rejection is simply part of the process that involves negotiations and could run several rounds, rather than the alternative characterization that this is a one step up or down decision.”
Media reports say that ATK officials will visit with Canadian regulators next week to continue discussions about the acquisition.
The proposed acquisition has its share of opponents in Canada, who believe their country would be parting with a national asset. ATK announced its deal for MDA in January, saying the acquisition would allow it to become a full spectrum space company (Defense Daily, Jan. 9). ATK has maintained all along that Canada would retain control of any sensitive assets, particularly the RADARSAT-2 earth imaging satellite.
Nadol, who doesn’t care for the acquisition due to risks in the space business combined with the added debt ATK would be taking on, said it may still be possible to salvage the deal if ATK is able to convince Canadian regulators that control of key national assets will remain with Canada.
MDA’s space business is involved in space robotics, satellite radar manufacturing, satellite to ground data transfer, the world’s largest global network of non-classified, commercial imaging satellite ground stations, and data processing to distribute solutions to a range of commercial, government and military customers.