Canadarm to wind up in U.S. hands?

The Wall Street Journal is reporting this morning that Vancouver-based MacDonald, Dettwiler & Assoc. (MDA:TSX) is trying to sell its space business for US$1 billion. The large U.S. defence contractors are balking at the price tag, according to the WSJ, so perhaps the Canadarm, originally built by Spar Aerospace, will stay on Canadian soil (except when it is zooming through space, of course). With Inco, Falconbridge, Sleeman, ATI, Dofasco, Corel, Westcoast Energy, etc. resting in foreign hands, what’s left but the Canadarm and the Stanley Cup!

The space division sale idea can’t come as a surprise to shareholders, given MDA’s strong and successful push into the information business over the years. And perhaps the notoriously stingy MDA management team will shave the price a bit and get the deal done. Too much leverage can be a bad thing in a rising interest rate environment, and MDA had $325MM of net debt at the end of the last quarter (~2x run rate EBITDA). So if cash-based acquisitions in the data, information or software world (CODA plc?) are at all on MDA’s mind, time to get some flex on that balance sheet. But is this the only way?

MRM