Editorial: The Roots of Opposition

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  Space News Business

Editorial: The Roots of Opposition

posted: 21 April 2008
02:06 pm ET





I
f the Canadian government ultimately rejects the proposed acquisition by Alliant Techsystems (ATK) of Canada’s flagship space hardware manufacturer, a good part of the blame lies in Washington and the U.S. policies designed to control the spread of space-related technology.

 

The deal would put the space business of MacDonald, Dettwiler and Associates (MDA) under U.S. corporate ownership, which naturally raises sovereignty issues for many Canadians. Clearly these concerns were underestimated by ATK, whose chief executive expressed confidence ever since the deal was announced in January that it would face no serious obstacles.

 

But they would have been far easier to allay were it not for a long string of ill-advised actions taken
by the U.S. government in the name of protecting national security.

 

The m
ost notable of
these occurred nearly a decade ago, when MDA was in fact owned by a U.S. company: Orbital Sciences Corp. In 1998, two years after Orbital bought MDA, the Canadian Space Agency selected MDA as the prime contractor on its Radarsat-2 radar satellite program. Radarsat-2, like its predecessor, Radarsat-1, was to be government-financed but owned and operated by MDA, which would be responsible for marketing the data to users worldwide.

 

But Radarsat-2 was designed to collect imagery at much sharper resolutions than Radarsat-1, and the prospect of having that data available on the commercial market alarmed U.S. national security officials. Unable to convince the Canadian government to adhere to U.S. policies governing commercial satellite imagery, Washington

�then in the midst of a wider crackdown on space-technology exports

�used its only remaining instrument: Orbital, the designated supplier of the Radarsat-2 satellite platform, was barred from engaging in technical discussions with its subsidiary and customer on the program. MDA and the Canadian Space Agency were thus forced to turn to a European contractor, Thales Alenia Space, for the platform. Orbital subsequently sold MDA to Canadian investors.

 

In an April 8 letter to ATK, Canadian Industry Minister Jim Prentice said he saw “no net benefit” to Canada from the deal and gave the U.S. aerospace and defense manufacturer 30 days to change his mind. Mr. Prentice shed light on his reasoning in an April 11 speech at the Canadian Space Agency: “Canada must retain jurisdiction and control of technologies that are vital to the future of our industry and the pursuit of our public policy objectives. We will not accept loss of jurisdictional control to another party. We must retain the jurisdiction over Canadian assets in space.”

 

MDA owns Radarsat-2, which was launched in December.
Much of the opposition to the ATK takeover centers on Radarsat-2 sovereignty concerns,
�and anyone opposing the deal on those grounds had a ready-made, hard-to-refute argument given the program’s history with the U.S. government.

What
�is unfortunate is that from a business and technology development standpoint, the best thing that could happen to MDA’s space business is to be acquired by a large U.S. company with direct access to the all-important U.S. government market and a willingness to invest in its new business
.

 

While the desire among many Canadians to foster a healthy domestic space industry is perfectly reasonable, the reality is that Ottawa doesn’t spend enough on space for that to happen.

 

ATK obviously sees great benefit from the deal as it tries to enter the U.S. government satellite business on the strength of MDA and Swales Aerospace, which it acquired last year. ATK Chief Executive Daniel Murphy has sought to blunt Canadian opposition by pledging to keep skilled jobs north of the border, but MDA and ATK appear to have been blindsided by the jurisdictional-control issue.

 

There are ways to structure deals such as these to preserve the independence of the acquisition target, and assure that Canadian taxpayers’ investment in programs like Radarsat 2 and Canadarm is not packed up and sent to the United States.

 

ATK officials are in discussions with the Canadian government in a last-ditch bid to salvage the deal. It might not be too late, provided ATK is willing to make the necessary guarantees on sovereignty, and the Canadian government and Mr. Prentice are willing to keep an open mind. Clearly this should have happened at an earlier date, and for this, ATK and MDA bear responsibility for not doing their homework with
government officials in Ottawa.

 

But if this purchase ultimately collapses, it
also can be chalked up as one more victim of U.S. government policies that have made close allies look like adversaries and satellites look like weaponry.