MDA selling space assets to US-based ATK

MacDonald, Wettwiler & Associates Ltd (MDA) is getting out of the space business with the sale of its aerospace division to Alliant Techsystems (ATK), Edina MI, for $1.3 billion. The sale of its space and ground segment assets leaves MDA as an information technology (IT) firm and could mark the end of Canada as a significant player in the space side of the aerospace sector.

Of the 3,000+ employees now employed by MDA, 1,900 are associated with the assets being sold. But ATK has vowed to leave those jobs and MDA production facilities in Canada. Some of those facilities were purchased from pioneering Canadian space company Spar Aerospace Ltd when the majority of its assets were sold off in 1999.

MDA put the assets on the block last year after failing to make significant inroads into the US market. While many have derided the proposed sale as a body blow to the aerospace sector, some industry observers defend MDA's decision as a prudent move given the lack of business within Canada. The Canadian Space Agency (CSA) is one of the largest providers of industry contracts, but its spending power pales in comparison with competitor nations.

In Europe and the US, institutional spending accounts for 60-75% of industry funding, whereas the CSA's budget of approximately $350 million accounts for about 12% of the $3 billion in annual Canadian aerospace sales.

"The Canadian government can't provide a large enough market for Canadian companies to survive," says an aerospace company executive. "If the government is not a steward of the sector, you risk seeing more Canadian companies being sold. It's an export-driven business."

Another industry observer notes that MDA was once completely foreign-owned before being repatriated in the 1990s. He contends that ATK's access to US contracts could boost overall aerospace business in Canada.

"The sale may actually enhance Canadian business by providing greater access to the US market," says the observer. "The Canadian space industry actually started with RCA in Montreal and Orbital Sciences owned MDA in the mid-90s. Electro Magnetic Sciences bought the Spar plant in Montreal which will now be owned by ATK. At the end of the day, work will be performed in Canadian laboratories by Canadians."

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