Two wealthy entrepreneurs are teaming up as part of an investor group to buy the maker of the Canadarm from its U.S. parent for $1-billion and repatriate the company’s headquarters to Canada.
John Risley’s Northern Private Capital is leading a group of equity investors that includes Jim Balsillie, the former chairman and co-CEO of BlackBerry Ltd., and Montreal investment company Senvest Capital to buy MacDonald, Dettwiler and Associates Inc., Canada’s largest developer and manufacturer of space technology. The deal will see them acquire all of MDA’s operations in Canada and Britain from their owner, Colorado-based Maxar Technologies Inc., if regulators approve.
The move would represent a return to Canadian ownership of one of the country’s enduring high-technology companies. For the investors, it is also a calculated bet that MDA will play a critical part in supplying players in what has been called a new space race, one that has seen some of the world’s largest tech companies look to the skies for a new business opportunity: to beam internet services from low-orbit satellites directly to consumers.
MDA’s ownership has been a thorny issue for Ottawa for years because of its ownership of important surveillance technology. In 2008, the government of Stephen Harper rejected the sale of the company to an American entity over concerns the U.S. would gain control over the Radarsat-2 satellite that allows Ottawa to monitor territory in the Far North. But after a series of other transactions, by 2017 the company had become part of Maxar, which is based in Westmister, Colo., north of Denver.
MDA has more than 1,900 employees at facilities near Vancouver, Toronto, Montreal and in Halifax. In addition to its space robotics business, it produces advanced surveillance, intelligence, defence and maritime systems and is a long-time supplier of satellite images to the Canadian government.
“I am so proud this iconic Canadian company will once again be owned and controlled in Canada,” said Mr. Risley, the Nova Scotia entrepreneur who co-founded seafood giant Clearwater Fine Foods, said in a statement Monday. He co-manages NPC with former Blackstone Canada executive adviser Andrew Lapham.
The investor group, which is partly funding the deal with loans 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. It was formerly based in the Vancouver area.
MDA’s revenue was expected to decline this year because of the end of its most recent Radarsat mission. Maxar said the businesses it is selling are on track for US$370-million in annual revenue and US$85-million in adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) in 2019.
The sale “furthers execution on the company’s near-term priority of reducing debt and leverage,” Maxar CEO Daniel Jablonsky said in a release. News of the deal was greeted warmly by investors, who bid up Maxar shares nearly 15 per cent in Monday’s trading.
The involvement of Mr. Balsillie points to potential opportunities for an MDA division that provides components and ground station capabilities for communications satellites operating in low-Earth orbit (LEO) – between 500 and 2,000 kilometres above the Earth’s surface.
Global heavyweights – including Richard Branson’s OneWeb, Elon Musk’s Space Exploration Technologies Corp., Amazon.com Inc. and Apple Inc. – are looking to crowd the skies with thousands of small satellites to deliver internet connectivity from space directly to customers, potentially bypassing traditional wireless carriers. Facebook Inc., Microsoft Corp. and Alphabet Inc.’s Google are also exploring satellite deployments. Plans by the U.S. government to install a “space force,” a military command higher up in the Earth’s orbit, could also translate into potential demand for even more satellites.
The LEO plans are in their early days and there’s no guarantee the business model of delivering the internet from space will work, given past failed efforts by Iridium, Teledesic and Globalstar.
If it does work, MDA would be well positioned as a supplier to LEO satellite makers; it makes antennas for OneWeb and has done early work for the design phase of Canadian satellite operator Telesat’s planned LEO satellite constellation.
That’s where Mr. Balsillie’s expertise could come in handy for MDA. He navigated a hotly contested race at the frontier of communications technology, as BlackBerry, then known as Research In Motion Ltd., developed technologies for mobile-data networks in the early 1990s that led to the creation of its signature wireless e-mail devices. Mr. Balsillie led the company’s commercialization strategy against the global giants of the era to deliver the first commercially successful mobile-data communications device, until it was disrupted by Apple’s creation of the iPhone and Google’s Android system.
Mr. Balsillie has spent his post-BlackBerry days advising tech entrepreneurs and governments on strategies to develop larger Canadian tech companies, as well as quietly investing in an array of holdings. His involvement in the MDA takeover marks one of his highest-profile investments since then.
Maxar put MDA on the block this summer to raise money to cut its sizable debt load: US$3.1-billion as of Sept. 30. Early on, the chief executive of Italy’s Leonardo SpA said his company, in partnership with France’s Thales SA, was considering a bid. This raised concerns about Canadian national security, given MDA’s focus on space, defence, maritime, satellite imagery and communications technology.
University of British Columbia Professor John MacDonald and physics graduate Vern Dettwiler founded MDA in a Vancouver garage in 1969. It went on to become a leader in robotics and high-resolution imagery of the Earth’s surface.
The federal government under then-prime minister Stephen Harper in 2008 rejected the proposed $1.3-billion sale of MDA to a U.S. company, Alliant Techsystems Inc.
MDA bought California-based satellite maker Space Systems/Loral Inc. in 2012 and decided to chase U.S. government contracts. 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.
The company then dubbed itself Maxar and reincorporated in the U.S. in late 2018, with an eye toward more government work. Maxar’s management, however, insisted that MDA operated as an independent business unit, with Canada retaining control of Radarsat.
The sale of the Canadian business is an attempt to right the ship at Maxar, which saw its shares lose more than 90 per cent of their value from late 2017 to early this year. A series of earnings misses raised fears about the company’s ability to pay its debt burden. Then, the company disclosed in January that its WorldView-4 satellite failed. That same month, it replaced Howard Lance as its CEO, naming Mr. Jablonsky, a U.S. defence and intelligence veteran, to the post.
With a report from Jeff Jones
Sean Silcoff
David Milstead