Thursday, April 10, 2008

Alliant Bid for MacDonald Rejected by Canada

By Alexandre Deslongchamps and Sean B. Pasternak

April 10 (Bloomberg) -- The Canadian government rejected the C$1.33 billion ($1.31 billion) sale of MacDonald Dettwiler and Associates Ltd.'s satellite business to Alliant Techsystems Inc., marking the first time Canada has blocked a foreign takeover since at least 1985.

Industry Minister Jim Prentice wrote to Edina, Minnesota- based Alliant on April 8 to say the proposed takeover doesn't provide a ``net benefit'' to Canada, according to an e-mailed statement today from his office in Ottawa.

``It's a shot across the bow and the government knows that this will be taken very seriously, not only by the prospective buyer, but also the U.S. government,'' said Richard Clark, a lawyer with Stikeman Elliott LLP in Toronto who specializes in mergers.

MacDonald Dettwiler fell C$4.13, or 8.8 percent, to C$42.72 at 10 a.m. trading on the Toronto Stock Exchange, the biggest decline in 11 months. Alliant gained 30 cents to $107.89 in New York Stock Exchange trading.

Alliant offered in January to acquire the space business of MacDonald Dettwiler, including Radarsat-2, a remote sensing satellite that scans Canada's Arctic region.

Technology Concern

Canadian lawmakers from all parties said at hearings in Ottawa this month that they're concerned the technology may become subject to U.S. national security laws and that Canada may lose its priority with Radarsat.

``If you are an investor in MacDonald Dettwiler at the moment, you are not going to be happy about this decision at all,'' said Paul Bradley, an analyst at Fraser Mackenzie Ltd. in Toronto. The sale made sense for the company, because the unit's lack of access to the U.S. market made it difficult to grow, he said.

Under Canadian investment law, Prentice can block any takeover of a Canadian company worth more than C$295 million if the deal doesn't provide ``net benefits'' to the economy, such increased productivity and research and development. This is the first time a foreign takeover has been rejected under the Investment Canada Act, which has governed takeovers since 1985.

There's a good chance Alliant will succeed in reversing Prentice's decision, Clark said. Alliant has 30 days to respond to the notice. Prentice will comment on his decision later today, spokeswoman Deirdra McCracken said in an email.

High Stakes

``It's a pretty high stakes game, and I would think that the potential U.S. buyer will try and see what it can do to resurrect the deal,'' Clark said.

Richmond, British Columbia-based MacDonald Dettwiler is an information technology company that also builds robotic parts for the International Space Station, including the Dextre robot that was installed during the Shuttle Endeavour's last mission.

The purchase would help Alliant build complete satellite systems. The MacDonald Dettwiler unit has 1,900 employees and estimated sales of $500 million for fiscal 2009.

``I don't think as a general term investors will look at this and say all of a sudden Canada is not open to foreign investment,'' because a similar acquisition in other countries would also face a stringent review, Bradley said.

Alliant spokesman Brian Grace and MacDonald Dettwiler spokeswoman Wendy Keyzer didn't immediately return phone calls placed before business hours today seeking comment.

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