MDA Looking to U.S. for Growth a Year After ATK Deal Nixed

VICTORIA, British Columbia — Almost a year after the Canadian government ruled against AlliantTechsystems‘ purchase of MacDonald, Dettwiler and Associates’ (MDA) space assets, the British Columbia firm has rebounded and is moving ahead with plans to market its products in the United States.

“We’ve been doing pretty good,” said MaguedIskander, president of MDA’s information systems group, which includes the firm’s space programs. “We are continuing to establish our presence in the
U.S.
market.”

Last January AlliantTechsystems (ATK) of
Minneapolis
announced it planned to purchase MDA’s information systems operations for 1.325 billion Canadian dollars ($1.068 billion) in cash. With the sale of those assets, MDA planned to move away from the space business and concentrate on its real estate support services business. But the proposed deal involving the
Richmond
,
British Columbia
, firm’s space assets generated intense political and public controversy. Canadian members of Parliament, scientists and a former Canadian astronaut all objected to the sale, warning that it would devastate the country’s space industry and transfer ownership of the nation’s main surveillance satellite to a
U.S.
firm.

MDA dominates
Canada
‘s space industry; it provides the robotic arm for NASA’s space shuttle and the international space station and is the prime contractor for
Canada
‘s Radarsat-2 Earth observation satellite. The Canadian government paid most of the 524 million Canadian dollar cost of building Radarsat-2 but turned over ownership of the spacecraft to MDA.

In April 2008, the Conservative government of Prime Minister Stephen Harper refused to approve the ATK-MDA sale, noting that it did not consider the transaction “to be a net benefit to
Canada
.”

MDA had seen the deal as a way for its space division to gain better access to
U.S.
commercial and military markets because of ATK’s significant presence in both.

Iskander
said the Canadian government’s decision not to approve the sale slowed down the company’s plan in that regard but did not change its overall strategy to boost its
U.S.
presence by working through American-based firms.

MDA has purchased several
U.S.
companies, including Alliance Spacesystems LLC in
Pasadena
,
Calif
, and is working with those firms to market Canadian-made niche technologies in radar imaging satellites and robotics to NASA, the U.S. Air Force and many of its contractors. “The basic legs of the plan are really the same,” Iskander explained. “The dimension that has changed is the speed. The whole plan with ATK was that it was an expedited approach.”

Iskander
said at the same time, new Canadian government efforts to support the space industry also have helped MDA. Last year the Canadian Space Agency awarded MDA a 109 million Canadian dollar project for robotics work on the international space station.

In January, the Canadian government announced it will invest 110 million Canadian dollars in space robotics and other technologies over the next several years. “As these opportunities materialize we are reasonably positioned to get work on programs,” Iskander said.

In addition, he noted that the Canadian Space Agency awarded MDA a 40 million Canadian dollar contract in November to begin design work for the Radarsat Constellation Mission. The project entails developing a constellation of three radar-imaging satellites scheduled for launch in 2012.

Richard Stoneman, an aerospace analyst with Dundee Securities in
Toronto
, said the government’s refusal to approve the MDA-ATK sale caused MDA’s stock price to drop but in the end it did not hurt the firm’s space business. “In terms of performance of the business, the space group has done very well,” Stoneman said. “Revenues are up, profits are up, backlogs are up.”

He noted that in 2008 the space division reported revenue of 40.6 million Canadian dollars. That was up 11.4 percent from 2007.

“How many companies are reporting revenues up by 11.4 percent these days?” asked Stoneman. “Their space business is solid.”

He also noted that MDA in November received a 16 million dollar Canadian dollar sale for Radarsat 2 data from an undisclosed foreign intelligence agency.

David MacDonald, an economist who produced a report last year on the state of
Canada
‘s space industry, said in retrospect the decision to stop the ATK purchase helped MDA. He noted that MDA’s strategy had been to sell its space division and focus almost entirely on software and support products for the real estate and housing market in the
United States
,
Canada
and the
United Kingdom
.

But with the worldwide economic recession the real estate market has been hard hit, he added.

“Staying in the space business protected them,” said Macdonald, who advises the Rideau Institute in
Ottawa
on the space industry. “It’s stable and government-funded with slower but more predictable growth.”

He said it is likely that MDA will receive a significant portion of the 110 million Canadian dollars in new funding the Canadian Space Agency has earmarked for research into robotics and other new space technologies.

But Stoneman cautioned that in the future MDA’s favored position within the Canadian government for space contracts might change. “In the long term the government might seek to diversify its suppliers of space-related information and technology,” he said. “Depending on one company and growing one company at the expense of others may not have been the best idea given what almost happened with the ATK-MDA deal.”