SANTA FE, N.M. — Maxar Technologies announced Dec. 30 it would sell its Canadian subsidiary to private equity firms, turning it into a standalone company while providing Maxar with much-needed debt relief.
Maxar said that a consortium of firms led by Northern Private Capital, a Toronto-based private investment firm, agreed to purchase MDA, Maxar’s Canadian business unit, for $1 billion Canadian ($765 million). The deal is pending regulatory reviews in both the United States and Canada.
If approved, MDA would become a standalone company that includes all of the Canadian business elements of Maxar, most notably work in synthetic aperture radar and space robotics technologies. MDA would have 1,900 employees and is estimated to generate $370 million in revenues and $85 million in adjusted earnings before interest, taxes, debt and amortization (EBITDA) in 2019.
Maxar said the sale will allow the company to reduce its debt, which stood at $3.1 billion as of September. The company has been taking various measures, including selling $291 million of real estate in Silicon Valley that previously belonged to satellite manufacturer SSL, to lower debt incurred over years of acquisitions and other deals.
“The sale of MDA furthers execution on the company’s near-term priority of reducing debt and leverage,” Dan Jablonsky, chief executive of Maxar, said in a statement. “It also provides increased flexibility, range, and focus to take advantage of substantial growth opportunities across Earth Intelligence and Space Infrastructure categories.”
The sale will decrease Maxar’s projected revenues and earnings in 2020 and beyond. The company, though, says it expects to offset that reduction with growth in other parts of the company and reductions in interest payments on its debt.
“This transaction, when combined with the recently completed sale of real estate in Palo Alto, reduces Maxar’s overall debt by more than $1 billion and significantly reduces Maxar’s leverage ratio,” said Biggs Porter, chief financial officer of Maxar, in a statement. “We expect the net effect of all these factors to only reduce our prior guidance for Adjusted EBITDA and free cash flow generation in the 2022 to 2023 time period by approximately $50 million.”
The deal effectively spins off the company at the heart of what became Maxar. MDA was founded in 1969 as MacDonald, Dettwiler and Associates and became a leading Canadian space company, with expertise in space robotics and imaging radar systems.
After the Canadian government blocked a proposed acquisition of MDA by American company ATK in 2008, MDA embarked on an effort to win business from the large U.S. government market. The company acquired SSL in 2012 and merged with DigitalGlobe in 2017. The combined company was renamed Maxar and headquartered in the United States, with the original MDA kept as a Canadian subsidiary.
MDA will still have ties to Maxar after the deal is completed as a supplier of components, which Maxar valued at $78 million in 2019. “We thank the talented employees of MDA, who have built a world-class business with unique capabilities, and we look forward to working with them as a commercial partner and component supplier to Maxar going forward,” Jablonsky said in the statement.