Risley, Balsillie group buying CanadArm maker MDA in $1-billion deal – The Globe and Mail

Two of Canada’s wealthiest entrepreneurs, John Risley and Jim Balsillie, are teaming up as part of an investor group to buy the maker of the CanadArm from its U.S. parent, Maxar Technologies Inc. for $1-billion and repatriate its headquarters to Canada.

Mr. Risley’s Northern Private Capital (NPC) announced early Monday it is leading a consortium of equity investors that includes Mr. Balsillie, the former chairman and co-CEO of BlackBerry Ltd., as well as Montreal-based investment company Senvest Capital to buy MacDonald Dettwiler and Associates Ltd. Canada’s largest space technology develop and manufacturer. MDA has more than 1,900 employees at facilities near Vancouver, Toronto, Montreal and in Halifax. In addition to its space robotics business, it is a long-time supplier of Radarsat Earth observation satellites to the Canadian government.

“Over its 50-year history, MDA has grown from a B.C.-based start-up into a world-class space technology company and an anchor of Canada’s space program,” said Mr. Risley, the Nova Scotia entrepreneur who co-founded seafood giant Clearwater Fine Foods and co-manages NPC with former Blackstone Canada chairman Andrew Lapham. “I am so proud this iconic Canadian company will once again be owned and controlled in Canada.” The consortium, which is partly funding the deal with debt provided by Bank of Nova Scotia, Bank of Montreal, PointNorth Capital and Canso Investment Counsel, did not specify where it would locate the headquarters of MDA, formerly based in the Vancouver area.

Maxar said MDA had US$370-million in annual revenue and US$85-million in adjusted earnings before interest, taxes, depreciation and amortization. The sale “furthers execution on the company’s near-term priority of reducing debt and leverage,” said CEO Daniel Jablonsky in a release.

News off the deal was greeted warmly by investors, who bid up Maxar stock by about 15 per cent in early morning trading. Analysts had cited the potential deal as a catalyst for its stock price.

NPC was advised in the deal by BMO Capital Markets and Bank of Nova Scotia. Maxar was advised by investment banks PJT Partners, RBC Capital Markets and Bank of America Merrill Lynch, as well as law firms Wachtell, Lipton, Rosen & Katz and Stikeman Elliott LLP.

Colorado-based Maxar had put MDA on the auction block this past summer, seeking to use proceeds cut its sizable debt load, though after a few months any talk of potential buyers went cold. Maxar had US$3.1-billion in long-term debt as of Sept. 30.

Early on, the chief executive officer of Italy’s Leonardo SpA said his firm, in partnership with France’s Thales SA, was considering a bid for MDA. This raised concerns about Canadian national security, given MDA’s focus on space, defence, maritime, satellite imagery and communications technology.

The Canadian government under then-prime minister Stephen Harper in 2008 had rejected the proposed $1.3-billion sale of MDA to a U.S. company, Alliant Techsystems Inc., over concerns the United States would gain control over the Radarsat-2 satellite that allows the Canadian government to monitor its territory in the far north. The saga prompted the Harper government to add the national security test to Investment Canada reviews of foreign takeovers of Canadian assets.

University of British Columbia professor John MacDonald and physics graduate Vern Dettwiler founded MDA in a Vancouver garage in 1969, the year humans first set foot on the moon during the Apollo 11 mission. It went on to become a leader in robotics and high-resolution imagery of the Earth’s surface. Orbital Sciences Corp. of Dulles, Va., bought MDA in 1995 for US$67-million and took the company public five years later, divesting the last of its stake in 2001.

MDA bought California-based satellite maker Space Systems/Loral Inc. in 2012, and decided to chase U.S. government contracts including those with non-military clients, such as NASA and the weather service, but it also meant going after classified defence and intelligence work. In 2017, the company paid US$2.4-billion to acquire DigitalGlobe, a U.S. satellite operator specializing in producing optical imagery for the government. That led to the operations being merged under the Maxar umbrella and its incorporation in the United States, though Maxar’s Colorado-based management insisted MDA operate as an independent business unit with Canada retaining control of Radarsat. Members of the scientific community criticized the shift of MDA’s parent company headquarters.

But Maxar’s shares lost more than 90 per cent of their value from late 2017 to early this year on fears about the company’s debt burden as well as the failure in January of its WorldView-4 satellite, which had generated revenues of US$85-million annually. That same month it replaced Howard Lance as its CEO, naming U.S. defence and intelligence veteran Daniel Jablonsky to the post.

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