Canada Ponders Its Space Future After Collapse of MDA Sale to ATK

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  Space News Business

Canada Ponders Its Space Future After Collapse of MDA Sale to ATK

By LON RAINS and LEONARD DAVID
Space News Staff Writer and Correspondent
posted: 12 May 2008
10:37 am ET



 

MONTREAL AND WASHINGTON � The Canadian government’s decision to block the proposed sale of MacDonald Dettwiler and Associates’ (MDA) space assets to Minneapolis-based Alliant TechSystems (ATK) has given new life to a debate about the future and priorities of Canada’s space industry.

 

The debate over the failed $1.33 billion deal for MDA’s Information Systems and Geospatial Services branch has been “a galvanizing moment” for the Canadian government, Ron Buckingham, of the Ottawa-based Northeast Space Company, told Space News.

 

“We needed a boot in the posterior to get public and political attention about the importance of space,” said Buckingham, who was co-chair of a meeting here April 28-May 1 involving top officials from the Canadian Space Agency, military space leaders, university researchers and industry executives.

 

The event, “Astro 2008 � Harnessing Space to Address Global Issues,” was sponsored by the Canadian Aeronautics and Space Institute of Ottawa.

 

“We really need to find a way to do a lot more in Canada with the skills and capabilities that we have,” said Bjarni Tryggvason, the other co-chair of the meeting and a former Canadian astronaut who works for the Canadian Space Agency (CSA).

 

CSA President Guy Bujold said he was bullish about recent expressions of support from Canadian Prime Minister Stephen Harper for increasing the Canadian space budget. “It is also incumbent upon us to bring forward to the government the ideas that are end-to-end solutions … that will allow them to buy into even more investment in space,” he added. Major-General Mike Ward, chief of force development for the Canadian Forces, said a new directorate will begin work this summer on a long-term plan for developing needed military space capabilities.

 

Space in Canada is at a watershed, said John Keating, chief executive officer of ComDev of Cambridge, Ontario. “We don’t have an industrial strategy for space in Canada,” Keating said, noting that a new plan is needed to sustain and develop Canada’s space industry. It has taken some 40 years in a private-public partnership to gain world-class capability, he said, adding that he fears that heritage could be destroyed. “The spotlight is absolutely shining on the space segment now. I don’t think business as usual is going to cut it.”

 

James Fergusson, director of the Centre for Defence and Security Studies and professor at the University of Manitoba in Winnipeg, agreed, noting that “with no strategic roadmap, the government is clearly vulnerable to emotional short-term political considerations.” Fergusson advocated creation of an independent national commission to shape a “realistic, effective and coherent” national strategy for space in Canada. “With limited resources, Canada can no longer afford to rest on its laurels and attempt to exploit space for Canadian strategic economic and security interest based upon the inefficient application of resources seeking to meet the individual bureaucratic interests,” he said.

 

Paul Cooper, vice president for strategic development for MDA Information Systems, said MDA is looking for a long-term growth solution, because it has “bumped up against the limits of what one company can do inside Canada.”

 

The ATK-MDA deal initially was rejected April 10, but ATK had a month under Canadian law to convince Industry Minister Jim Prentice to reverse his decision. In a statement issued May 9 Prentice said he had studied the issue exhaustively and concluded that the deal did not provide “a net benefit to Canada,” a prerequisite for approval of any deal under the Canada Investment Act, or ICA.

 

“Foreign investors bring with them capital, knowledge, capabilities and technology that can increase the productivity, efficiency and competitiveness of Canadian firms. However, where a significant transaction does not demonstrate net benefit to Canada, it cannot be approved under the Investment Canada Act,” Prentice said in his statement and in a letter sent to Alliant TechSystems.

 

After the sale was announced, it sparked a major political debate in Canada about the wisdom of giving the United States control of cutting-edge Canadian technology such as the Radarsat 2 satellite and fostered fears that Canada’s access to Radarsat 2 imagery might be adversely affected by the U.S. export controls on satellite technology, which are governed by the International Traffic in Arms Regulations (ITAR).

 

ATK spokesman Brian Cullin said the company had been confident the deal would go through because “of the previous 1,587 deals reviewed under the ICA, none had ever been denied.” He also acknowledged that the company did not anticipate the degree to which ITAR would be a factor in the Canadian government’s decision.

 

“We tried to convince them otherwise; obviously we were not persuasive,” Cullin said in a May 9 telephone interview. “Our focus was to grow the business internationally as well as domestically in Canada.”

 

Cullin said ATK considers Prentice’s decision final.

 

ATK said in a May 9 statement it would add a one-time charge of $6.6 million in its just ended fourth quarter to account for the costs associated with the failed deal. Cullin said the company intends to explore all legal avenues to see if it can recover those costs from the Canadian government.

 

Vancouver-based MDA issued a brief statement noting that the government had turned down the deal. “MDA will continue with its baseline long-term business plan of growing its business and delivering shareholder return. The company will be holding its first quarter update on May 12, 2008, at 2:30 p.m. PST.”

 

In a May 9 speech at Canadian Space Agency headquarters in Quebec, Prentice said he has appointed an advisory committee “to guide me in the future prospects of the CSA, and I look forward to their recommendations.”

 

During his speech, according to a transcript published on the Industry Canada Web site, Prentice lavishly praised Canada’s accomplishments in space. “Why should Canadians care whether or not we remain at the forefront of space exploration and development? Some might answer that question by saying, ‘Because that is where our future lies.’ But I would answer it in a different way: because that’s what gives us a competitive edge in today’s economy,” Prentice said.

 

“Of course, we have a special relationship with our closest ally and most important trading partner, the United States. We will build upon that partnership, but we will maintain our mutual respect for the sovereignty of each power. We share with the United States a concern that technology stays in the hands of friendly nations. But we will also work with Canadian firms with global aspirations that are constrained by foreign concerns over the export of technology,” Prentice said.

 

At the end of his speech, Prentice announced the signing of a four-year, $109-million contract extension between the Canadian Space Agency and MacDonald Dettwiler for continued engineering services for the Canadian-made Mobile Servicing System on the international space station.