Canada’s MacDonald, Dettwiler and Associates (MDA) is optimistic it will be able to sell its space division to a U.S. company in the coming months despite the Canadian government’s rejection of just such a deal – the $1.33 billion sale to Alliant Techsystems Inc. (ATK) of Edina, Minn
. The key,
MDA Chief Executive Dan Friedman said May 12
, is
whether the Canadian government succeeds in winning British- and Australian-level exemptions to U.S. laws on extraterritorial rights regarding U.S. companies operating abroad.

Meanwhile, Friedman said, MDA is focusing its efforts on maximizing the revenue potential of the company’s Radarsat-2 high-resolution radar Earth observation satellite, which was launched in December and became operational April 25. Friedman said MDA is negotiating to sell Radarsat-2 follow-on satellites to potential customers in the United States and the Middle East.


In a May 12 conference call with investors, Richmond, British Columbia-based MDA said prospects for its space division, known as Information Systems and Geospatial Services
, which it had hoped to sell to ATK, have never been better.


Specifically, Friedman
said the early performance of Radarsat-2 is “an incredible success” and has given MDA credibility as it bids to sell similar satellites outside of Canada.

“We have proven to the world that we can build the best radar surveillance satellite,” Friedman said. “And parallel to that, MDA has developed, on its own nickel, the next generation of technology to further improve the satellite. So we’re marketing Radarsat-2 follow-ons. The U.S. is one such customer where we have an active proposal. The Middle East is another such active customer.


“These are multi-hundred-million-dollar proposals. They have been submitted. We’ve been in the evaluation stage. But we needed to show up with real data and prove what we could do. That’s what we are doing and we expect to conclude that during the summer and hopefully have some success in the fall and winter on follow-ons.”


Radarsat-2 features a substantial amount of components provided by
manufacturers in Italy, France and Britain. One European industry official, whose company built part of Radarsat-2, said he was surprised by Friedman’s remarks.

“I know of no RFP [request for proposals] by the U.S. government for a radar satellite of this type,” the official said May 14. “If MDA had put a bid in following an RFP, it almost certainly would have consulted with its subcontractors, if nothing else than at least to discuss bid prices, so I am perplexed at his remarks.”


Canadian Industry Minister Jim Prentice on May 9 rejected the ATK purchase of MDA’s space division, confirming his earlier assessment that the sale was not of “net benefit” to Canada.


Friedman said MDA remains in the dark about why the sale was denied.


“We’re as baffled as everyone else in the country,” he said. “Let me put it diplomatically: There was no constructive dialogue toward a resolution. There would have been an opportunity to [discuss] what the issues were and work through them, but that’s not the way this was dealt with. We made lots of proposals. We wrote letters. We made presentations. We asked for meetings. We had all kinds of ideas to deal with things we imagined might be problems. But … we did not get a constructive dialogue going.”


Friedman said MDA tried six times to schedule a meeting with Prentice, without success. “We could not get any meetings with anybody,” he said. “We had trouble even getting a ‘Hello’ during the launch of Dextre,” the Canadian robot the U.S. shuttle carried to the international space station in March.

Friedman said the Canadian government’s objection to the sale was based on the U.S. government’s insistence that U.S. companies follow U.S. law even when operating outside the United States.

Friedman said Britain and Australia have won exemptions to this policy, and that the Canadian government is working to secure similar treatment.


The Canadian government, he said, “has made significant progress over the last few months to try to get exemptions that the British and Australians have. Should they be successful at that – and we have every reason to think they will be – then that fundamental issue will go away. As far as we can tell [from a Canadian government letter sent to ATK May 9 explaining its decision], that was the issue. It is in the best interest of Canada to solve that problem, for the whole aerospace industry.”

ATK spokesman Brian Cullin said May 16 that the Canadian government provided different reasons for rejecting the deal
, and that extraterritoriality and the U.S. International Traffic in Arms Regulations
were among the reasons offered toward the end of the negotiations.

Cullin said Canadian authorities did not indicate that Radarsat-2 and its future use was an issue, unlike what much of the public debate in Canada suggested. Cullin said ATK was presented with no argument that the company thought was insurmountable given U.S. law.


Prentice, in explaining his decision during a May 9 press briefing, nonetheless cited
Radarsat-2 as one of the issues.


“[C]entral to this transaction were the assets that … included Radarsat-2 … and the effect of extraterritorial application of foreign law on those assets, should the transaction have proceeded,” Prentice said according to a transcript of the briefing provided by Industry Canada.


“We will work very diligently to try and ensure that American markets are available to Canadian companies, but Canadians should not have to sell their assets and their companies to access foreign markets,” Prentice said.