MDA’s $2.4 billion merger with DigitalGlobe is the biggest space acquisition to close so far this year. But MDA Corp. CEO Howard Lance sees the merger as the combination of four companies, not two. That’s because MDA and DigitalGlobe each had major acquisitions of their own in recent years — MDA bought satellite manufacturer SSL in 2012 for $1.1 billion, and DigitalGlobe bought geospatial analytics specialist Radiant Group in 2016 for $140 million.
That “quadruple merger” of sorts now places all four companies under the name Maxar Technologies, with Lance
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holding the title of president and CEO over the conglomerate. Lance says Maxar Technologies will look for opportunities “to bring to bear two, three or even four of the capabilities that we have across the company, such as an integrated product suite that might have radar and optical imagery along with some kind of analytics or change detection.”
Maxar Technologies’ formation accelerated MDA’s transition to becoming a U.S.-incorporated company — roughly three quarters of Maxar’s 6,500 employees are based in the United States. Lance, himself a recent addition to give Canadian-born MDA an American boss, is based at Maxar’s headquarters in San Francisco. The pivot to the U.S. is a multi-year transition aimed at capturing lucrative U.S. government business, while simultaneously not losing the favor of MDA’s current largest customer: the Canadian government.
SpaceNews spoke to Lance about what to expect from the newly formed company.
What does the geographic footprint of Maxar Technologies look like?
The transition from an employee standpoint is now complete. All employees of Maxar Technologies are under the U.S. operating company, SSL MDA Holdings, Inc. We still have the [MacDonald, Dettwiler and Associates] Ltd company registered in Canada, but all of the employees and management are under the U.S. company. So from a U.S. government standpoint, we are operating as a U.S. company today with U.S. citizens.
In terms of the head count, it’s something like 6,500 in total — about 4,600 in the U.S., about 1,800 in Canada, and about 100 spread throughout the rest of the world.
The majority now of the company’s revenue emanates from the U.S.-based companies, as well as a majority of the earnings.
What is there to do between now and 2019, when you expect to be incorporated in the U.S.?
Lots of legal-related structuring that has to be effected in order to make the top company a U.S. domicile. It takes time to go through the legal processes, consult with the various legal and tax authorities; you can’t just flip a switch. But we have accelerated the operational portion of it by moving everything under the U.S. company with our small headquarters in San Francisco.
Does expanding your U.S. presence involve shrinking your Canadian presence?
No. Because the businesses are not moving or closing. Essentially, those numbers of 1,800 in Canada were the same before the merger as they will be after.
The tipping into the U.S. is because with DigitalGlobe we’ve picked up 1,700 employees. It’s adding those employees to our previous U.S. count.
Are you concerned Maxar will lose satellite contracts to other builders if imagery firms see you as a competitor?
I think there’s a lot of precedence that suggests that won’t happen. For example, we are the largest merchant supplier of antennas and satellite subsystems out of our Montreal organization even though Montreal also collaborates with SSL. The key to being a merchant supplier is you have to have security processes that don’t allow confidential information to spill from one program to another, including if that program is in a sister division. We are putting those same kinds of procedures in place at SSL to make sure that our other remote-sensing customers for satellites don’t have any concerns. We do that today at any given time with, say, 15 different operator comsats in our factory. There’s lots of confidential information that we have to protect that doesn’t go across those programs. We have people trained to deal with that and we compartmentalize a lot of the program work as a result.
We haven’t seen any reduction in the discussions or the pipeline we have with potential Earth-observation optical customers as a result of this announcement.
Can you give an update on the status of WorldView Legion?
Only that the order for the satellite constellation construction has been given to SSL. Contracts are in process with other suppliers. The schedule is intact for launch in 2020.
The capacity and capabilities are meant to ultimately replace WorldView-1 and WorldView-2, not that those will necessarily go end of life when Legion is launched. Most of these satellites operate well past their design life.
Are you concerned about losing access to Canadian government business?
Ultimately it’s about your capabilities, your commitment, and jobs in Canada. This merger doesn’t change any of that, so I believe as long as we maintain the kind of focus and commitment that we’ve had with the Canadian government over the now almost 50 years of MDA’s history, there’s no reason that should change. In fact, we believe we’ll now have broader and more capable solutions to bring to the Canadian government such that we might be able to grow business that previously we would not have been able to achieve. But it certainly does depend on our continued focus and that’s why the business model that we use is independent, autonomous business units. The MDA businesses across Canada will continue to operate and serve their biggest customer, the Canadian government. Our pro forma revenue for 2016 is about nine percent of the total company, or thereabouts, to the Canadian government, so it’s an important part.
Will MDA and SSL lose access to Export Development Canada funding as a result of the merger?
We don’t see any reason why that should be the case. I can’t speak for EDC. They have been a long-term supporter on many of our programs. We still have lots of content subsystems coming from Canada. I don’t see why they wouldn’t continue to support us, but I haven’t had that specific discussion.
MDA and DigitalGlobe refiled its merger paperwork with the Committee on Foreign Investment in the United States (CFIUS) this summer, extending the review period. Why?
We can’t know for sure because the process isn’t very transparent, but our view is this largely was because of the backlog in their process. I’m told they have in excess of 200 petitions in front of them.
We answered a number of rounds of questions, but frankly very few of those questions were circulated in the first 75-day period.
Our view is they have a backlog and all the agencies that make up CFIUS are not fully staffed, because in the end we were able to achieve their support with no material impact or requirements that we had to fulfill over and above what we already fulfill with part of our security clearances with the Department of Defense.
What is something — big or small — Maxar Technologies can do now that it couldn’t before?
I believe that our end-to-end capability and commercial business model and agility can solve [remote-sensing] problems much more quickly together than if we had to previously work out agreements between companies for sourcing of products and components. We focus on a customer problem, we can develop, build, launch operate and provide lots of analytics around an Earth-observation remote-sensing satellite much faster than the ecosystem that exists where you have multiple companies trying to work together. Things just don’t get done at the same clock speed.
This article originally appeared in the Oct. 23 issue of SpaceNews Magazine.
