Monday, June 12, 2017

US and Chinese Firms Joust Over Norsat as Opposition Criticizes Liberals for Allowing Sale

          By Chuck Black

Policy discussions on Canadian hi-tech and space initiatives are no longer restricted to the "safe space" of polite, off-the-record presentations in places like the government appointed Space Advisory Board (SAB), which the Trudeau government tasked earlier this year to consult with various "stakeholders" and help define key elements of a new space strategy, expected to be released later this month.

Innovation Minister Bains in Parliament on June 9th, 217, when he said, "Mr. Speaker, as I said yesterday, every single transaction is subject to a national security review. This is a multi-step review process, and the process was followed. We take the advice and feedback from our national security agencies very seriously, and based on that advice, we proceeded with this transaction. I want to reassure the member and this House that we never, ever will compromise our national security." Opposition members simply didn't believe him and cited quite a bit of evidence to the contrary, including a June 2nd, 2017 Norsat press release, "Norsat Announces Investment Canada Notice Regarding Proposed Acquisition by Hytera Communications Co., Ltd.," which stated that there would be no review of the sale. For the full exchange, check out the June 9th, CPAC video record of the discussion. Photo c/o CPAC.

Those discussions spilled over to the Canadian Parliament last week, where they took on an increasingly partisan tone as opposition critics in both the Conservative party and the NDP repeatedly called Innovation Minister Navdeep Bains to task for his handling of the proposed sale of Vancouver, BC based Norsat International Inc. to Shenzhen, China based Hytera Communications

As if matters weren't complex enough already, an obscure US based hedge fund has also made an unsolicited offer to purchase Norsat. And yesterday, a US congressional commission said the Hytera sale "jeopardizes US national security," and urged the Pentagon to “immediately review” its dealings with Norsat.

The June 12th, 2017 Globe and Mail post, "US rebukes Canada over Chinese takeover of Norsat," quoted US-China Economic and Security Review Commissioner Michael Wessel as stating that "the Liberals appear to be willing to sacrifice national-security interests of its most important ally in exchange for obtaining a bilateral free-trade deal with China."

As outlined in the June 12th, 2017 Globe and Mail post, "US hedge fund makes bid for Canadian tech firm wanted by Chinese giant," Atlanta based Privet Fund Management has made a counter-offer of $11.50 US ($15.30 CDN) a share for Norsat stock. Privet has asked Hytera to match the bid or Norsat will accept the Privet offer and pay a termination fee of $2.5Mln US ($3.3Mln CDN) to Hytera. 

This is not Privet's first attempt to purchase Norsat. As outlined in the May 18th, 2017 Norsat press release, "Norsat Notifies Hytera of Superior Proposal from Privet Fund Management LLC," Hytera and Privet have been jousting over Norsat for the last several months. 

Norsat sells patented satellite communications technology for security, public safety and defence applications to a multitude of Canadian and American government and military agencies, including the Pentagon.

As outlined in the June 8th, 2017 Globe and Mail article, "Critics oppose Liberals' handling of Chinese investor's Norsat takeover," opposition members "slammed the Liberal government on Thursday for giving what they called a serious lack of scrutiny to a Chinese investor’s takeover of a Vancouver high-tech firm even though Canada and its allies depend on the company’s communications technology."

This latest Federal government decision is a reminder that the governing Liberal party is far less concerned about the foreign ownership of Canadian high-tech and space companies than the previous Conservative government.

It's also a reminder that the current iteration of Canadian Earth imaging, communications and space companies, such as Vancouver BC based UrtheCast, Cambridge, Ontario based exactEarth, and even more established firms like Richmond, BC based MacDonald Dettwiler (MDA) and Waterloo, Ontario based Teledyne Dalsa often depend heavily on military and government customers to purchase their technology for various command, control and communications (C3) functions.

As outlined originally in the four part series, “Canada’s Military Space Policy,” which ran once a week from December 27th, 2010 until January 16th, 2011, selling to the military and to the intelligence community has not traditionally been a place where peaceful Canadians felt they belonged.

Perhaps we should become acquainted with our new role. The proper forum for that discussion, is a public one.
Chuck Black.

Chuck Black is the editor of the Commercial Space blog.

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