Ottawa plans longer probe of Canadarm maker's sale
TU THANH HA AND KEVIN CARMICHAEL
20:51 EST Thursday, Mar 20, 2008
MONTREAL, OTTAWA — — Faced with a growing chorus of concerns about Canada's leading aerospace assets passing into American hands, Industry Minister Jim Prentice will take an extra 30 days before deciding whether to allow the sale of the geospatial unit of MacDonald Dettwiler and Associates Ltd.
The delay was hailed by critics of the sale of MDA's space business to the
U.S. weapons and aerospace giant Alliant Techsystems Inc. [ATK-N]
The $1.3-billion deal, however, had been approved last week by over 99.9 per cent of voting shareholders of Richmond, B.C.-based MDA.
"Shareholders were expecting a windfall from this transaction. At this point it may not happen," Dundee Securities Corp. analyst Richard Stoneman said yesterday.
"The risks, the uncertainty about the transaction have escalated," he added.
The controversy has placed Mr. Prentice in the delicate position of having to balance pro-business considerations with concerns about Arctic sovereignty and military security.
Yesterday's postponement, outlined in a letter to Alliant, came two days before Mr. Prentice was supposed to end his review of the transaction under the Investment Canada Act.
Thanks to about $500-million from taxpayers, MDA built and launched Radarsat-2, a state-of-the-art observation satellite that can see through clouds and nighttime cover.
The division also built the Canadarm, a robotic arm on the space shuttle and the international space station.
Since the transaction was announced, "relative to the market, MDA shares have done very well," Mr. Stoneman said. "I'm not sure how well they'll do if this transaction fails."
His firm changed its rating for MDA from "buy" to "neutral" in the wake of the outcry over the sale.
There have been concerns about whether Canada would still have priority access to Radarsat-2 images from the country's northern regions.
Through Radarsat-2, MDA is involved in the Canadian Forces' Polar Epsilon project, which would provide the military with up-to-date, all-weather images of the country's oceans and Arctic region.
Mr. Prentice "is certainly having to consider factors that are not normally as prominent in foreign investment cases," said Michael Byers, Canadian research chair in international law and politics at the University of British Columbia.
Critics are also hoping that Foreign Affairs Minister Maxime Bernier will intervene. Prof. Byers said Mr. Bernier has the power, under the Remote Sensing Space Systems Act, to cite national security reasons to veto the transaction or amend the Radarsat-2 licence.
Similarly, the Rideau Institute, a think tank that opposes the transaction, and the Canadian Auto Workers released a legal opinion questioning whether the sale is permitted under the act.
Institute president Steven Staples said the delay was an encouraging sign the government was "beginning to wake up'' to the impact of the sale.
Once the 30-day postponement is over, Mr. Prentice could ask for another delay but he would then need the consent of the companies involved, departmental spokesman Bill Rodgers said.
Neither MDA nor Alliant have made comments in recent days, even though Alliant previously indicated it was willing to testify before a parliamentary committee.
Mr. Prentice is also keeping mum.
"He's much in the same position as a judge is on this," Mr. Rodgers said.
Based in Edina, Minn., Alliant calls itself an advanced weapon and space system company and boasts that it is the largest producer of ammunition in the U.S.
CanadArm Sold to US - Northern Sovereignty/Security Problem Results
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