By Euan Rocha
TORONTO, June 27 Loral Space & Communications
Inc has agreed to sell its satellite manufacturing
subsidiary, Space Systems/Loral (SS/L) to Canadian
communications rival MacDonald, Dettwiler and Associates Ltd
for about $875 million.
The deal is set to enhance Macdonald Dettwiler's position in
the communications arena and creates potential for increased
business with both commercial and government clients.
"Both Space Systems/Loral and MDA are already important
suppliers to the worldwide satellite industry," John Celli,
President of Space Systems/Loral said in a statement. "The
combination is a very good strategic fit for both companies."
MDA said the acquisition, which will immediately boost its
earnings, will make it a major player in commercial
communications and provide it with critical mass in the U.S.
"This is a game changing transaction for our company," said
Daniel Friedmann, MDA's Chief Executive in a statement.
"Post-acquisition, more than two-thirds of MDA's total revenues
will come from the commercial market."
California-based SS/L has developed satellites that are used
for television broadcasting, direct-to-home television services,
broadband communications, military communications, wireless
telephony, digital satellite radio, weather monitoring and air
Following the acquisition, MDA expects to have combined
annual revenues of close to $2 billion, and a combined order
backlog of $2.8 billion.
"Space Systems/Loral's business is fundamentally driven by
the worldwide demand for television, digital audio, broadband
Internet, mobile communications, and voice telephony," said
Friedmann. "By acquiring one of the major companies that enable
these essential communications services, MDA will move
immediately to the forefront of this growing business."
MDA plans to finance the transaction with cash on hand, a
three-year note payable for $101 million, and about $500 million
of borrowings under a new $1.1 billion fully committed credit
facility from RBC Capital Markets.
The boards of both companies have approved the deal, which
is expected to close later this year after certain regulatory
PROCEEDS TO SHAREHOLDERS
Loral said in addition to the $875 million it will also
receive cash dividends and other payments from its SS/L
subsidiary, which are expected to be in excess of $135 million.
MDA will pay $774 million in cash for all of the equity of
SS/L. It will also pay $101 million through a bank guaranteed
three-year promissory note for certain real estate assets that
are tied to the SS/L business.
Loral said its board intends to evaluate alternatives for
returning to shareholders the after-tax proceeds resulting from
the divestiture of SS/L.
Loral's other businesses include a 64 percent interest in
Telesat, which owns a global fleet of satellites. It provides
video broadcasting to customers across the globe and also offers
broadband services for corporate, telecom and government
The proposed deal for SS/L comes roughly four years after
the Canadian government stepped in to block a C$1.33 billion
($1.29 billion) sale of MDA's own satellite arm to U.S. rival
Alliant Techsystems Inc, on the basis that the deal was
not of 'net benefit' to the country.
Canada feared that the sale of the MDA unit would have led
to the loss of crucial technology and hampered its satellite
surveillance capabilities. It marked the first time that the
country used the powers of the Investment Canada Act to block a
foreign takeover of Canadian assets.
BofA Merrill Lynch acted as lead financial advisor to MDA in
connection with the transaction. RBC Capital Markets also
provided financial advice to MDA. Credit Suisse and J.P. Morgan
acted as financial advisors to Loral on the deal.