A romance the whirlwind of After, the which included a truncated the public a lasting courtship Barely a week, the BC Richmond based (Officially, and for now! Just AT Least) MacDonald Dettwiler (the MDA) has Announced ITS an intent to purchase US based satellite imagery by provider DigitalGlobe Inc. (DGI) for about $ 3.10Bln CDN, in what some have categorized as " the biggest deal yet in the fast-consolidating earth-imaging satellite market ."
As outlined in the February 24th, 2017 the MDA press release, " the MDA to the Acquire DigitalGlobe, Creating Company Industry Leader in End-to-End Space Systems', Earth Imagery and the Geospatial Solutions ," the MDA will of the acquire DGI for $ 35 US ($ 46 CDN) per share " in a combination of cash and stock ."
The complete transaction provides an information value of approximately $ 3.1Bln CDN with an enterprise value of $ 4.7Bln CDN for DGI, but also includes $ 1.6Bln CDN in DGI net debt, which will be taken by MDA.
The transaction has been " unanimously " approved by the boards of directors of both companies and is expected to close in the second half of 2017, contingent on stockholder and regulatory approval.
Those regulatory hoops are perhaps the most interesting. As outlined in the press release:
As part of the transaction, the MDA will apply to a list of its shares on the (New York Stock Exchange) NYSE in addition to (its current listing on) the (Toronto Stock Exchange) TSX. Upon completion of the transaction, the combined company will continue to execute its US Access Plan strategy.
This will include the further reorganization of all or part of the combined Company of corporate and operating structure to ensure that the ultimate parent of DigitalGlobe is incorporated in the US by the end of 2019, subject to customary approvals.
Even better, at least according to the press release, " MDA, the US MDA, the US Department of Defense (DoD) , "in order to gain access to US military contracts.
That re-org was discussed in the October 7th, 2016 post, " Iconic MacDonald Dettwiler is Now SSL MDA Holdings, a US Based Company with a Canadian Subsidiary ."
Of course, there are synergies and useful components to the latest deal.
At the very least, this re-org will make it difficult for any company Delaware Incorporated SSL MDA Holdings to effectively bid on the upcoming Worldview Legion Constellation.
As outlined in the February 24th, 2017 Space News post, " In buying DigitalGlobe, MDA ensure that the MDA will be built just-displayed by the WorldView Legion constellation ," before going public with their plans to merge, " Canada's MDA Corp. and DigitalGlobe were already working together on the next-generation imaging constellation called WorldView Legion they say will be able to revisit some locations on Earth up to 40 times in a day . "
But there are concerns.
MDA CEO Lance. Photo c / o Twitter .
The investment community is concerned over the total amount of the net debt created as a result of the transaction.
Net debt to operating earnings before interest, tax, depreciation, and amortization (EBITDA) for this deal, often called " net leverage " will work out to about 4.1, which is essentially higher than the traditional MDA.
According to MDA CEO Howard Lance, MDA expects to be able to reduce net leverage back to 3.0 between now and 2020, a period of three years.
Since the net debt to EBITDA, the implication is that the MDA is planning only a slow payback of its outstanding debts, and may even be intending to reduce net leverage by growing the company.
And it will not be the last re-org. According to Lance, "' the ultimate parent of DGI " will be incorporated in the US before the end of 2019.
But Wait! There's More!
As of February 24th, 2017, Access Wire press release " SHAREHOLDER ALERT: Levi & Korsinsky, LLP Announces an Investigation Concerning" to the MacDonald Dettwiler and Associates Ltd. is Fair to Shareholders - DG I, "at least one US based law firm, NY based Levi & Korsinsky, LLP , has been offered to give " shareholders of voice ," in the upcoming merger.
But Levi and Korsinsky lawyers are also in the process of being involved in a variety of companies including Endologix, Inc. , Cemtrex, Inc. , Inotek Pharmaceuticals Corporation , the Board of Graña y Montero and even FaceBook .
So any reports of potential litigation, especially from this particular firm, should be taken with a grain of salt.
Of The deal Also the highlights of Canadian Government security Concerns related to the of RADARSAT-2 and the upcoming of RADARSAT of Constellation mission (RCM) since compliance with US Regulations " under the Guidance and Approval Out of the US Department of Defense (the DoD )," Opens up closeup Canadian based programs to US regulations and oversight, even when the contracts are concluded.
In essence, MDA's new corporate structure puts Canadian civilian and military projects at considerable risk when US concerns perceive a need, or even a simple business focusing competitive advantage, to US interests.
Here's a recent example.
As outlined in the March 30th, 2001, the Globe and Mail post, " Bilateral spatening delays, costing millions ," RADARSAT-2 was once at the core of a US / bilateral disagreement relating to its capabilities (which were considered to be equal or better than anything the US was capable of generating at the time.
NASA launch. A second launch from California was first postponed and then cancelled as well. New components needed to be sourced from non-US based suppliers. All told those disruptions and delays to overruns.
Thank goodness MDA, the prime contractor for RADARSAT-2, was then Canadian owned. Otherwise the program would be completely derailed. RADARSAT-2 was eventually launched on December 14th, 2007, almost seven years later, from Kazakhstan's Baikonur Cosmodrome.
The April 10th, 2008 CBC News post, " Federal government blocks sale of MDA space division ." Wanna know why is the Federal government under the Prime Minister? Stephen Harper, the MDA to Alliant Techsystems (ATK) in 2008? That's easy; It's because of the Canadian government to the US effort to put the kibosh on RADARSAT-2. Screenshot c / o CBC News.
The September 2009 Canadian Space Agency (CSA) document on the RADARSAT-2 Major Crown Project , "stated explicitly that:
NASA had (originally) agreed to this "Arrangement for Enhanced Cooperation in Space between NASA and CSA," signed in May 1994. This document (the "Clark Evans Agreement") was an agreement in principle to co-operate on several undertakings including RADARSAT 2.
Information in the 2009 RADARSAT-2 Revised Project Brief notes that NASA informed the CSA in December 1998 that it would not honor the Agreement, citing reasons related to the commercial nature of the satellite and the fact that its enhanced performance would be a major competitor to US industry .
The 2009 CSA evaluation also noted that, while the RADARSAT-2 program was " aimed at develop the (Earth Observation) EO sector ," and used the same methodology as used in the 1970s to grow the Canadian commercial satellite communications sector, the other delays to the program provided by other competitors time to generate alternative offerings and prevented Canada from dominating the marketplace.
Prime Minister, Justin Trudeau, is engaged with the US government and MDA executives in the US and Canada to facilitate US re-incorporation and restructuring to take advantage of the US military and government opportunities and benefits.
If so, they are doing so much at the expense of MDA's Canadian employees and the Canadian public at large. The government should be held accountable and a public debate should be held.
Otherwise, our Canadian space industry is going to end up either moving to the US, or working in retail.
Of Constellation of currently is of RADARSAT scheduled for launch sometime in 2018. Here's Hoping That IT does not end up closeup as with the part of " ' the Ultimate (US based) parent of DGI " CEO of the which the MDA in Lance has Promised for 2019.
Chuck Black.
