By Chuck Black
Eight years after the Federal government rejected its sale to US based Alliant Techsystems (ATK) because it was not of "net benefit" to the country, BC based Macdonald Dettwiler (MDA) has quietly turned into a Delaware holding company, changed its name, added several new US based board members and moved its corporate headquarters to San Francisco.
Richmond, BC based MDA which, as outlined in the June 27th, 2012 post, "MacDonald Dettwiler buys Space Systems Loral for $875M," purchased Space Systems Loral (SSL) outright in 2012, will now function as a subsidiary of the new SSL MDA Holdings Inc., as will Palo Alto, California based SSL.
According to the press release:
The new appointments follow a common pattern in the space industry of appointing military and intelligence experts. As outlined in the February 23rd, 2015 post, "The Growing Military Importance of Earth Imaging,"other Canadian companies, including Vancouver, BC based UrtheCast, have recently been bolstering their board as a preliminary to soliciting large US government and military contracts.
According to the press release, William D. McCombe has been appointed senior vice president and chief financial officer of SSL MDA Holdings, although current MDA executive vice president and chief financial officer Anil Wirasekara will retain his post.
As outlined in the April 10th, 2008 CBC News post, "Federal government blocks sale of MDA space division," the last time MDA attempted to relocate itself to the US, the Federal government under then Prime Minister Stephen Harper, blocked the sale, citing ICA provisions requiring a "net benefit" to Canada resulting from the sale.
But according to Macdonald Dettwiler (MDA) corporate communication manager Wendy Keyzer, no money has changed hands and no sales have taken place.
Therefore, "the Investment Canada Act does not apply" and any review would "require a transaction by a foreign investor of a Canadian company of over a threshold of $600Mln"she said, in an e-mail interview on October 5th, 2016.
But her statement might not be entirely accurate. According to the Federal government website on "An Overview of the Investment Canada Act (FAQs) - Frequently Asked Questions" section titled "Does the Investment Canada Act apply to me?" the official answer is far more ambiguous:
Neither Keyser nor others at MDA have responded to follow-up questions related to this story and a request for an interview with subject matter experts at the Federal Ministry of Innovation, Science and Economic Development to discuss MDA compliance with the terms of the Investment Canada Act has, so far at least, not been confirmed.
This article will be updated as new information becomes available.
Over the last year, two of the three largest Canadian space companies (MDA and Cambridge, ON based COM DEV International, which was purchased by New Jersey based Honeywell International in January 2016), have ended up as subsidiaries of US based corporations.
Eight years after the Federal government rejected its sale to US based Alliant Techsystems (ATK) because it was not of "net benefit" to the country, BC based Macdonald Dettwiler (MDA) has quietly turned into a Delaware holding company, changed its name, added several new US based board members and moved its corporate headquarters to San Francisco.
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| Once the headquarters of Canada's preeminent space company, MDA HQ in Richmond, BC is now just another regional office for a Canadian subsidiary of a giant US multinational. Photo c/o T-Net. |
And those actions seem to have been undertaken without triggering a formal review under the Investment Canada Act (ICA), the Canadian Federal law governing large, foreign direct investment in Canada, which was used as the legal basis for rejecting the 2008 sale.
MDA is the iconic Canadian space company which manages, supports and builds a variety of Canadian civilian and military assets including the Canadarm, RADARSAT-2 and the upcoming RADARSAT Constellation Mission (RCM).
According to the October 3rd, 2016 MDA press release, "MDA announces board and senior executive appointments to enable US Access Plan implementation," the current actions by the MDA board have built upon previously announced plans designed to gain access to the lucrative US military and civilian satellite marketplace. Those plans include the creation of a San Francisco, California based holding company (SSL MDA Holdings) to serve as the operating entity for "all MDA businesses, including both the US and Canada."
MDA is the iconic Canadian space company which manages, supports and builds a variety of Canadian civilian and military assets including the Canadarm, RADARSAT-2 and the upcoming RADARSAT Constellation Mission (RCM).
According to the October 3rd, 2016 MDA press release, "MDA announces board and senior executive appointments to enable US Access Plan implementation," the current actions by the MDA board have built upon previously announced plans designed to gain access to the lucrative US military and civilian satellite marketplace. Those plans include the creation of a San Francisco, California based holding company (SSL MDA Holdings) to serve as the operating entity for "all MDA businesses, including both the US and Canada."
Richmond, BC based MDA which, as outlined in the June 27th, 2012 post, "MacDonald Dettwiler buys Space Systems Loral for $875M," purchased Space Systems Loral (SSL) outright in 2012, will now function as a subsidiary of the new SSL MDA Holdings Inc., as will Palo Alto, California based SSL.
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| New SSL MDA Holding CEO Lance. Photo c/o NAB. |
Previous actions included the establishment of SSL MDA Holdings, Inc., a Delaware corporation, which will serve as the operating company for all MDA businesses, including both the US and Canada.
Howard L. Lance, MDA president and chief executive officer, has been appointed chairman, president and chief executive officer of SSL MDA Holdings, Inc., with its headquarters office in San Francisco, CA.
Eric Zahler and Lori Garver, members of the MDA board of directors, have been appointed to also serve on the SSL MDA Holdings, Inc. board of directors. In addition, two new outside directors have been appointed.The additional SSL MDA board appointments include retired USAF General C. Robert Kehler (just coming off a distinguished US military career with a deep focus on space strategy and policy) and Joanne O. Isham, a former senior executive within the US intelligence community who has acted as deputy director of the National Geospatial Intelligence Agency (NGIA), the deputy director for science and technology and the director of congressional affairs at the Central Intelligence Agency (CIA), and the director of legislative affairs at the National Reconnaissance Office (NRO).
The new appointments follow a common pattern in the space industry of appointing military and intelligence experts. As outlined in the February 23rd, 2015 post, "The Growing Military Importance of Earth Imaging,"other Canadian companies, including Vancouver, BC based UrtheCast, have recently been bolstering their board as a preliminary to soliciting large US government and military contracts.
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| New SVP & CFO Bill McCombe. Photo c/o SSL. |
As outlined in the April 10th, 2008 CBC News post, "Federal government blocks sale of MDA space division," the last time MDA attempted to relocate itself to the US, the Federal government under then Prime Minister Stephen Harper, blocked the sale, citing ICA provisions requiring a "net benefit" to Canada resulting from the sale.
But according to Macdonald Dettwiler (MDA) corporate communication manager Wendy Keyzer, no money has changed hands and no sales have taken place.
Therefore, "the Investment Canada Act does not apply" and any review would "require a transaction by a foreign investor of a Canadian company of over a threshold of $600Mln"she said, in an e-mail interview on October 5th, 2016.
But her statement might not be entirely accurate. According to the Federal government website on "An Overview of the Investment Canada Act (FAQs) - Frequently Asked Questions" section titled "Does the Investment Canada Act apply to me?" the official answer is far more ambiguous:
If you are not a Canadian citizen or a permanent resident, within the meaning of the Immigration and Refugee Protection Act (i.e., a person who has been ordinarily resident in Canada for not more than one year after the time at which he/she first became eligible to apply for Canadian citizenship), then you are a non-Canadian and must comply with the provisions of the Investment Canada Act.As outlined in the exemptions section of the Investment Canada Act, those exemptions are numerous and subject to legal interpretation.
For the purposes of the Act, a non-Canadian includes any entity that is not controlled or beneficially owned by Canadians.
If you are a non-Canadian and you propose to establish a new Canadian business or to acquire an existing Canadian business, then you MUST either file a Notification or an Application for Review of the investment unless a specific exemption applies...
Neither Keyser nor others at MDA have responded to follow-up questions related to this story and a request for an interview with subject matter experts at the Federal Ministry of Innovation, Science and Economic Development to discuss MDA compliance with the terms of the Investment Canada Act has, so far at least, not been confirmed.
This article will be updated as new information becomes available.
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| What happened the last time MDA tried to relocate control of its space assets to the US. As outlined in the April 10th, 2008 CBC News post, "Federal government blocks sale of MDA space division," then Industry Minister Jim Prentice said he was "not satisfied" the sale would be a net benefit for Canada and rejected it. Screenshot c/o CBC. |
Ottawa based Telesat Canada, the third of what were once the "Three Kings" of the Canadian space industry, has been unsuccessfully trying to sell itself off for years.
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Chuck Black is the editor of the Commercial Space blog.
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| Chuck Black. |
Chuck Black is the editor of the Commercial Space blog.
This exodus south of the border is in some respects simple economics, but it is also clearly indicative of the impotence of CSA and its udder failure at implementing its mandate to support and foster the Canadian space sector. Operating budgets aside, all you have to do is compare the behaviour of CSA to, say ESA or NASA and you can tell right away they don’t have a clue what they are doing . What is worse is that the international community knows it, which further limits the opportunities for Canadian companies. No wonder competent companies are jumping ship.
ReplyDeleteI agree that the exodus south is, in some respects at least, simple economics.
ReplyDeleteBut to be fair to the CSA and their perceived competence, it was far easier to keep MDA in line in 2005 when half the CSA budget could be sent to MDA and provide half of MDA's approximately $400Mln total revenue for the year.
Back then, we were their largest customer.
These days, $200Mln from Canada would be only 10% (or less) of MDA's current estimated $2Bln plus annual sales. Canada might now be better served by throwing money at smaller, perhaps more appreciative start-up.
We might also be better served if we stopped loan support for MDA (and SSL) built satellites under Export Development Canada (EDC).
As outlined in the October 4th, 2016 Space News post, "MDA further erases Maple leaf, adds Stars and Stripes," both MDA and SSL (as a subsidiary of MDA) were eligible for loan support, at least until the current re-org.
In reference to your article, please be advised that SSL MDA Holdings Inc. is a 100% subsidiary of the Canadian domiciled public company, MacDonald, Dettwiler and Associates Ltd. (MDA.
ReplyDeleteMDA’s Canadian operations will continue to be run in Canada by our Canadian management team. The workforce for our radar, robotics and satellite communications antenna and electronics businesses will remain in Canada. R&D will continue to be done in Canada and we will continue to export from Canada. MDA’s corporate head office is in Vancouver and MDA’s stock will continue to be traded on the TSX.
We have been very transparent on our US expansion and why we are pursuing it - it will allow us to bid on and execute a much broader range of U.S. Government procurements. Our ambition is to grow and strengthen our Canadian operations through the increased business opportunities that will result - benefiting not only our shareholders but also our thousands of talented employees across Canada.
Wendy Keyzer, MDA Communications Manager
Thank you for your response, Wendy.
ReplyDeleteI just wish your statement was reflected in the October 3rd, 2016 MDA press release, "MDA announces board and senior executive appointments to enable US Access Plan implementation," which is discussed above.
According to the October 3rd, MDA press release, SSL MDA Holdings, Inc., "will serve as the operating company for all MDA businesses, including both the US and Canada," and not the other way around.
Nor is it reflected in any other publicly available documentation I've been able to uncover.
In my October 12th, 2016 e-mail to you, I specifically asked for clarification and independent validation that "SSL MDA Holdings Inc. is a 100% subsidiary of the Canadian public company, MacDonald, Dettwiler and Associates Ltd. (MDA)."
I look forward to further communications with you to clarify this situation.
I understand that your company is currently walking a fine line between fulfilling the US ITAR regulations required to bid on US military and DARPA contracts and the (perhaps) contrary requirements of the Canadian government with which your firm is also required to remain in compliance with.
Good luck. Maybe we can connect tomorrow.
I think that at one point, you even suggested getting together with MDA CFO Anil Wirasekara. I'm still open to getting his comments out.