Shares of MacDonald Dettwiler (TSX:MDA) are soaring today after BC-based company announced it had agreed to acquire Space Systems, a subsidiary of New York satellite communications company Loral.
MDA will pay (US) $875-million plus cash dividends and other payments from SS/L, which are expected to be in excess of (US) $135-million
Dan Friedmann, MDA’s president and CEO said: “This is a game changing transaction for our Company,” “With one move, we are bringing together two market leaders to create a unique global communications and information company with a strong commercial focus. Post-acquisition, more than two-thirds of MDA’s total revenues will come from the commercial market.”
Macdonald Dettwiler says that after the acquisition it will have annual revenues of $1.9 billion and an order backlog of $2.8 billion. In fiscal 2011, the company earned $129.6-million on revenues of $761-million.
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Loral was founded in 1948 by William Lorenz and Leon Alpert as Loral Electronics Corporation. The company went public in 1959 and has since formed partnerships with Ford Aerospace, Qualcomm and IBM. In 1996, Lockheed Martin acquired the defense electronics and system integration businesses of Loral for $9.1 billion, and the company adopted the name it known by today. Loral’s revenue has grown from $869-million in fiscal 2008 to more than $1.1-billion in 2011.
MacDonald Dettwiler is also the result of a partnership. The company was formed in 1969, a pairing of the efforts of John MacDonald and Werner Dettwiler. Since then, MDA has been a part of the fabric of Canadian technology. The Richmond, BC based aerospace giant’s Canadarm, a robotic space arm developed in the 1970′s to repair and service NASA space shuttles, is iconic. But the company has, in more recent times, been forced on the rocky road of reinvention. 2010′s revenue of $688 million was barely half of 2007′s. In 2011, however, MDA began to get back to its aerospace roots, which it had briefly been sidetracked from. The company sold its real-estate information business, which provided property information to insurance companies, lenders, and legal professionals, to US private equity firm TGP Capital. The sale of the unit, which was once thought to be a key to the company’s growth, gave MDA an $819 million shot in the arm, making a large acquisition such as the one announced today possible.
The pickup of Loral means Macdonald Dettwiler may be able to stem the tide of layoffs that have resulted from government cutbacks to Radarsat funding,
On March 30th, a day after the Canadian federal budget was released, Macdonald Dettwiler issued a press release, plaintively stating the company “has concluded that the budget does not include the funds required to continue the RADARSAT constellation mission (RCM) as currently envisioned.” Radarsat cutback may have been doubly puzzling because, in 2008, the federal government blocked the proposed sale of the company’s space division to US-based Alliant Techsystems. The move was the first time in the twenty-three year history of the Investment Canada Act that the federal government blocked a foreign takeover because of a failure of the “net benefit” test.
At press time, shares of MacDonald Dettwiler were up 21.8% to $54.36.
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