ATK Becomes End-End Satellite Competitor with $1.3B MDA Acquisition
Alliant Techsystems announced today that it has negotiated definitive agreements with Canadian-based MacDonald, Dettwiler and Associates to acquire its Information Systems and Geospatial Information Services businesses for C$1.325 billion (about $1.318 billion). MDA’s IS/GIS business has more than 1,900 employees and estimated FY 2009 revenues of approximately USD$ 500 million, and is a global leader in space-based radar systems, space robotics (the robotic arms for the NASA Space Shuttle and International Space Station are MDA products), satellite systems, and imaging satellite ground stations and processing; with additional world-class capabilities in satellite payloads, C4ISR, and geospatial services.
ATK’s rationale for the acquisition was straightforward:
“This acquisition will establish ATK as a full-spectrum international space company, providing launch services, next-generation satellites, robotics, and the ground systems that will process and deliver mission critical information solutions. It will also provide an entry point for MDA’s proven high-performance technology to the U.S. market, creating significant sales growth opportunities. Further, it will diversify ATK’s portfolio into non-U.S. and commercial space markets, nearly doubling the company’s international revenues. The transaction will also enhance ATK’s existing and potential content in space exploration, Operationally Responsive Space, and C4ISR; while adding satellite ground station and geospatial imagery content.”
Indeed, ATK CEO Dan Murphy told Bloomberg that the acquisition will make ATK the 5th largest space- systems supplier to the U.S. government, below Lockheed Martin, Boeing, Northrop Grumman, and Raytheon. MDA’s product line and expertise would add payloads Alliant doesn’t currently offer, including communications systems, radars, and ground station elements.
The price was also right. The purchase price is less than 10x the unit’s earnings before interest, taxes, depreciation, and amortization (EBITDA), versus an industry mean valuation of 12.5x for similar transactions. With the global satellite and space business experiencing limited growth, and access to the US military market hindered by its location, it isn’t entirely surprising that MDA might be under more pressure to sell into a limited base of possibile acquirers rather than continue – an orientation that would make it less able to get full value from a buyer. MDA President and CEO Daniel Friedmann more or less confirmed this when he said that:
“This transaction will enable us to focus our management and financial resources exclusively on our rapidly growing Information Products business, where many opportunities are waiting for us around the world. At the same time, the operations we divest will have greater growth potential under a complementary U.S. owner who recognizes its inherent value, and who is better positioned than we are to unlock this value in the U.S. market.”
Still, there was apparently some range of interest. In June 2007, The Wall Street Journal had reported that Lockheed Martin and Northrop Grumman were also potential buyers.
The remaining MDA business will have about 1,100 employees, and announced a “shareholder rights” plan on the same day as the acquisition. It will impose certain conditions on any takeover attempts, and is described as “similar to plans adopted by other Canadian companies.” This may also assist with regulatory approval of the divestiture in Canada, which has certain sensitivities about key national high-tech firms.
The divestment/acquisition transaction, which has been unanimously approved by each company’s Board of Directors, is expected to close early in Q2 2008, and is subject to MDA shareholder approval, regulatory approvals in Canada and the U.S., and various other consents and approvals.
Assuming all of these approvals are in order, ATK will establish ATK Space Systems on April 1/08. Carl Marchetto, formerly Executive Vice President and General Manager of Orbital Sciences Corporation’s Space Systems Group, will become President, ATK Space Systems. With operations in 4 Canadian Provinces and across the United States, ATK Space Systems is expected to generate FY 2009 sales of approximately $900 million.
- ATK release (Jan 8/07)
- MDA release (Jan 8/07)
- Blomberg (Jan 8/07) – Alliant Buys MacDonald Satellite Unit for $1.3 Bln (Update2)