Com Dev Expects Multiple Gains from MDA Sale

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  Space News Business

Com Dev Expects Multiple Gains from MDA Sale

By PETER B. de SELDING
Space News Staff Writer
posted: 12 March 2008
03:06 pm ET




PARIS — Satellite-component builder Com Dev of Canada expects to profit from both the sale of Canada’s MacDonald, Dettwiler and Associates (MDA) to AlliantTechsystems (ATK) of the United States and from the Canadian protests objecting to that same deal, Com Dev Chief Executive John Keating said March 6.

Keating said Minnesota-based ATK intends to use its purchase of MDA of British Columbia to bolster ATK’s product portfolio as it goes after U.S. government business. As a major MDA supplier, Com Dev should benefit from any increased business MDA does in the United States, Keating said.

But Com Dev also expects to take advantage of the protests of the sale in some Canadian government and public circles insofar as the deal has raised Canadian consciousness of the importance of a healthy domestic space industry.

“This particular transaction has caused a great deal of controversy,” Keating said in a conference call with investors. “The concern expressed over the sale of a key piece of our country’s space industry to a U.S. company has reinvigorated people’s interest in space, and they have begun to realize that space assets are of strategic importance to Canada.”

Com Dev, which after the MDA sale closes will become the largest Canadian-owned space-hardware builder, should be able to take advantage of any increased Canadian government space spending, Keating said.

Keating said the price ATK is paying for MDA’s space divisions, about $1.33 billion, “is attractive. We took this valuation to be a vote of confidence in the prospects for the space industry.”

Ontario-based Com Dev reported that for the three months ending Jan. 31, revenue totaled 44.9 million Canadian dollars, or $45.5 million, a 13.7 percent increase over the same period a year ago despite the 17 percent decline in the value of the U.S. dollar relative to Canada’s currency in the period.

The dollar’s decline is eating into Com Dev’s gross profit margins and will continue to do so as Com Dev works through contracts signed at more-favorable exchange rates. To the extent possible, Keating said, Com Dev will be increasing its prices for products sold in U.S. dollar-based contracts.

Com Dev in 2007 opened a new factory in El Segundo, Calif., and created a subsidiary, Com Dev USA LLC, to position the company to win more U.S. government satellite business. Com Dev USA in January announced it is purchasing the Passive Microwave Devices product line of L-3 Communications Electron Technologies Inc. for $12.2 million. Com Dev Chief Financial Officer Gary Calhoun said the deal should close in late March.

Adding the former L-3 business to Com Dev USA will boost the new U.S. unit’s revenue by about $10 million in 2008 and likely will take the division, which had expected to report a loss for the year, into profitability. Com Dev is bringing 65 L-3 employees into its U.S. operation as a result of the sale.

Keating said that for Com Dev as a whole, revenue for the fiscal year ending Oct. 31 should increase by 10-15 percent, and perhaps a bit more depending on how the enlarged U.S. operation performs.