Maxar to sell Canadian unit for $765 million
Updated at 3:58 p.m. Eastern with comments from Maxar CEO Dan Jablonsky.
SANTA FE, N.M. — Maxar Technologies announced Dec. 30 it would sell its Canadian subsidiary to private equity firms, turning it into a standalone company while providing Maxar with much-needed debt relief.
Maxar said that a consortium of firms led by Northern Private Capital, a Toronto-based private investment firm, agreed to purchase MDA, Maxar’s Canadian business unit, for $1 billion Canadian ($765 million). The deal is pending regulatory reviews in both the United States and Canada.
If approved, MDA would become a standalone company that includes all of the Canadian business elements of Maxar, most notably work in synthetic aperture radar and space robotics technologies. MDA would have 1,900 employees and is estimated to generate $370 million in revenues and $85 million in adjusted earnings before interest, taxes, debt and amortization (EBITDA) in 2019.
Maxar said the sale will allow the company to reduce its debt, which stood at $3.1 billion as of September. The company has been taking various measures, including selling $291 million of real estate in Silicon Valley that previously belonged to satellite manufacturer SSL, to lower debt incurred over years of acquisitions and other deals.
“The sale of MDA furthers execution on the company’s near-term priority of reducing debt and leverage,” Dan Jablonsky, chief executive of Maxar, said in a statement. “It also provides increased flexibility, range, and focus to take advantage of substantial growth opportunities across Earth Intelligence and Space Infrastructure categories.”
Maxar had been unable to significantly pay down debt while also financing the six-satellite WorldView Legion imaging constellation it is building in house. The first of those satellites launch in early 2021 on a SpaceX Falcon 9 rocket.
The sale will decrease Maxar’s projected revenues and earnings in 2020 and beyond. The company, though, says it expects to offset that reduction with growth in other parts of the company and reductions in interest payments on its debt.
“This transaction, when combined with the recently completed sale of real estate in Palo Alto, reduces Maxar’s overall debt by more than $1 billion and significantly reduces Maxar’s leverage ratio,” said Biggs Porter, chief financial officer of Maxar, in a statement. “We expect the net effect of all these factors to only reduce our prior guidance for Adjusted EBITDA and free cash flow generation in the 2022 to 2023 time period by approximately $50 million.”
The deal effectively spins off the company at the heart of what became Maxar. MDA was founded in 1969 as MacDonald, Dettwiler and Associates and became a leading Canadian space company, with expertise in space robotics and imaging radar systems.
After the Canadian government blocked a proposed acquisition of MDA by American company ATK in 2008, MDA embarked on an effort to win business from the large U.S. government market. The company acquired SSL in 2012 and merged with DigitalGlobe in 2017. The combined company was renamed Maxar and headquartered in the United States, with the original MDA kept as a Canadian subsidiary.
MDA will still have ties to Maxar after the deal is completed as a supplier of components, which Maxar valued at $78 million in 2019.
Jablonsky, in an interview, said Maxar intends to use MDA as a component supplier for Telesat LEO, a constellation of around 300 small broadband satellites the company is competing to build. Thales Alenia Space and Airbus Defence and Space are also competing for what is estimated to be a $3 billion contract.
All three companies have emphasized having a Canadian presence to Ottawa-based Telesat, which has expressed a preference for a Canadian factory.
Jablonsky said selling MDA shouldn’t negatively impact Maxar’s chances of winning the Telesat LEO program because Maxar already has a history of building satellites for Telesat.
“Maxar, the Palo Alto side of the team, has very good capabilities in overall system design, specification and engineering work,” he said. “We would hope to win on that basis.”
Telesat is expected to chose a manufacturer for Telesat LEO in early 2020. If Maxar wins, MDA would likely handle antennas and spacecraft components, Jablonsky said, though a loss wouldn’t preclude MDA’s involvement.
“We had always contemplated whether we won or if someone else won the bidding on Telesat’s space portion of the program, that MDA would be an integral part of that,” he said. “We haven’t held them back from being able to participate in other sorts of arrangements.”
Jablonsky said Maxar retains exclusive rights to sell MDA’s Radarsat-2 data to the U.S. government, plus non-exclusive rights to sell its radar data elsewhere.
Maxar will consist of roughly 4,000 people after the MDA sale closes, he said.
Caleb Henry contributed to this article.