Comdev side deal may be the answer for Alliant

There is a story making its way around Bay Street law firms right now, and it has to do with the alleged “real reason” why the federal Conservative government turned down the proposed acquisition of MDA’s space systems division by Alliant Techsystems (ATK:NYSE) (see prior post “Prentice is right to reject MDA space deal” April 10-08).

The story obstensibly is that a press event was planned for Prime Minister last year involving RADARSAT-2 and the role the new satellite was to play in our nation’s Arctic Sovereignty strategy. Two days before the event was to take place, MDA supposedly advised Ottawa that it would be selling their space systems division. The optics on the big photo op changed pretty quickly, or so the story goes. Perhaps there was to be an event, and the proposed sale undercut the planned PMO messaging, but the implication that Industry Minister Prentice has refused to approve the deal ’cause MDA ruined a “messaging day” seems ludicrous to me.

But as a backstory – accurate or not – it certainly serves the interests of MDA executives as they try to handle their shareholders, employees and Alliant. “It’s not our fault. These guys are getting us back for ruining an event for the PM.”

The only good news for Alliant is that there way be a way out of this mess.

If COMDEV (CDV:TSX) can be convinced to take the tricky satellite pieces off MDA’s hands, with the Canadarm and associated NASA work staying with Alliant, it may well be that Minister Prentice can ultimately sign off on the deal. But small cap COMDEV doesn’t have the financial heft that Alliant enjoys, so the price will have to change — something that stingy MDA could have a difficult time swallowing.

Still, though, there is a way out the weeds for all concerned. MDA just needs to put some water in its wine and convince COMDEV, with some encouragement from Ottawa, to play along.

MRM