MDA Will Expand Space Offerings With Purchase of EMS Unit

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MacDonald, Dettwiler and Associates (MDA) will gain a foothold in the rebounding commercial satellite-component market and also strengthen its Earth observation capabilities via its acquisition of EMS Space & Technology of Montreal, according to an MDA official.

“It certainly gives us opportunities for both commercial and government” business , said Mag Iskander, executive vice president and general manager for MDA’s space missions segment . “For example, EMS is one of the world-renowned suppliers of communications antennae and equipment, and that in itself will give us an entry into this area.”

MDA of Richmond, British Columbia, is Canada’s top space hardware and integration company but has yet to venture into the commercial market, Iskander said.

Under an agreement announced Oct. 31, MDA will purchase the Space & Technology unit of Atlanta-based EMS Technologies for an undisclosed sum pending approval by Canadian regulatory authorities. EMS Technologies has been trying since July 2003 to sell the Montreal operation, which has struggled in the last few years but recently has shown signs of recovery.

In a Nov. 4 interview, Iskander said MDA will pay “fair market value” for the purchase. He said MDA would announce financial details upon closing the deal, which is expected to happen by the end of the year.

In its press release, EMS was similarly vague on the terms of the deal, saying only that cash received at closing would help reduce its debt by $20 million. EMS spokeswoman Anne Wainscott-Sargent said Nov. 4 that the company is not commenting on the sale until its third-quarter earnings call with investors Nov. 8.

The Space & Technology unit, which makes antennae, antenna subsystems and other electronic spacecraft components, lost $4.3 million in 2004 and $46.3 million in 2003. The unit struggled mightily with a radar antenna it was building for Canada’s Radarsat 2 satellite, a program on which MDA is prime contractor.

Iskander said those issues are largely resolved, and that the Radarsat 2 payload was delivered during the week of Oct. 31, though the paperwork will be finalized sometime in November.

EMS’s unit has been a significant supplier to MDA for some time, according to Iskander. The acquisition will help MDA expand its Earth observation satellite offerings, and enhance its electronics and robotics capabilities, he said.

“It’s a normal and natural vertical integration step,” Iskander said.

EMS Space & Technology will operate as a wholly owned subsidiary of MDA, and will fall under the company’s space missions segment, he said.

Kevin Dede, a wireless technology analyst with San Francisco-based Merriman Curhan Ford & Co., said Nov. 4 he had “mixed feelings” about the transaction. He said the commercial satellite market has been rebounding of late and could have proven fruitful for EMS down the road.

“I can understand the company’s perspective, wanting to raise the cash,” Dede said. “But they had weathered the ugliest pat of the storm and things were starting to come back … there certainly are opportunities in the commercial satellite business; I just don’t think the company wants to make the capital [expenditures] necessary to grow this business.”

EMS still is working to sell its SatNet division, which is classified as a discontinued operation, just as Space & Technology was. According to EMS’s press release, a letter of intent for such a transaction has been signed, but the company provided no additional details.