Canadian investor consortium buys space technology company MDA for $1 billion


An iconic aerospace firm is back in Canadian hands after a group of high-profile investors strike a blockbuster deal. Here’s what you need to know:

The deal: Colorado-based Maxar is selling MDA’s Canadian and U.K. businesses to a group of Canadian investors for $1 billion. That includes a workforce of 1,900 and “ground stations, radar satellite products, robotics, defense, and satellite components,” which are expected to bring in US$370 million in revenue this year.

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The buyers: Toronto-based Northern Private Capital led the consortium. The firm’s first fund is anchored by money from the fisheries and telecom billionaire John Risley, and is helmed by Andrew Lapham, a former executive at private equity giants Onex and Blackstone and husband to Ontario Transport Minister Caroline Mulroney. Jim Balsillie, the former co-CEO of Research in Motion (now BlackBerry) is also participating, as is Montreal-based Senvest, a publicly traded investment company that’s previously owned broadcasting assets. The transaction is also being financed with debt issued by Scotiabank, BMO and Toronto-based firms PointNorth Capital and Canso Investment Counsel.

Why it matters: Founded by University of British Columbia colleagues John MacDonald and Werner Dettwiler in the former’s Vancouver basement in 1969, MDA has worked on many of Canada’s most well-known space projects—including the one pictured on the five-dollar bill, the Canadarm. It built both generations of the robotic arm, as well as all three of Ottawa’s Radarsat surveillance and Earth-observation satellite networks, the latest of which became operational this month. It’s been hailed as a Canadian technology success story—so its acquisition by Maxar, following a 2017 deal that merged it with satellite operator DigitalGlobe, elicited worries over the loss of a national champion. The previous Conservative government had blocked a 2008 takeover attempt by U.S. defence contractor Alliant Techsystems. The new owners said they will repatriate MDA’s corporate headquarters, though they did not specify where—it has six offices across British Columbia, Ontario, Quebec and Nova Scotia.

The opportunity: Space is the final business frontier. Morgan Stanley estimates the industry could grow from US$350 billion in 2019 to more than US$1 trillion by 2040, led by demand for satellite broadband internet access. U.S. companies like Amazon, SpaceX and OneWeb, as well as Ottawa-based Telesat, are vying to offer coverage via constellations of low-Earth orbit (LEO) satellites. Those firms alone will spend billions buying equipment, and MDA is one potential supplier—in June 2016, it won a contract to build antennae for OneWeb. Space Systems/Loral, which MDA bought in 2012, also has a design deal with Telesat. Monday’s deal brings in domain expertise. Balsillie, who will reportedly sit on MDA’s board, commercialized telecommunications technology at RIM. Risley, meanwhile, made much of his money by selling his Carribean-based wireless, cable and broadband company.

The (possible) challenge: Governments tend to be particular about where their space suppliers are based, and to whom they sell technology. For example, MDA set up a San Francisco-based operating company in 2016 as part of a “U.S. Access Plan” to win contracts in Washington. The deal shores up MDA’s position in Ottawa, at a time when the Canadian government is backing LEOs—in July, it signed a $600-million deal for access to Telesat’s network, and awarded it $85 million from the Strategic Innovation Fund for development work. But it remains to be seen what the repatriation will mean for MDA’s prospects of winning U.S. business; Lapham did not respond to The Logic’s request for comment.

The market reaction: Maxar’s stock on the New York Stock Exchange was up more than 17 per cent in early afternoon trading. In a research note, CIBC analysts Stephanie Price and Scott Fletcher wrote that the deal was “positive” for the U.S. firm, “reducing leverage and allowing the company to focus on its core Imagery business.” They said the Canadian consortium paid a reasonable price, worth 2.1 times the division’s sales.