MacDonald Dettwiler and Associates Ltd. has denied speculation that it is in talks to sell its space division.
The statement Wednesday came out shortly after Bloomberg News reported that MDA, best known for its robotic space equipment, is in talks with private equity firms about a possible sale of part or all of the company.
MDA said that it "is not evaluating a sale of its systems division or any portion thereof" but added that it "continually evaluates strategic alternatives" and "such alternatives may include various merger and acquisition transactions." The company said it had nothing to report at this time, though its statement was vague about the future of its information products division.
The speculation was the first time MDA's name has been mentioned in an M&A context since 2008 when the federal government invoked the Investment Canada Act to shut down a $1.3-billion takeover bid for its space division by Minnesota-based Alliant Techsystems Inc. That was the first, and so far only, time the federal government used the law, which was drafted to protect Canadian companies for foreign takeover bids. It is back in the spotlight as a result of BHP Billiton Ltd.'s takeover bid for Potash Corp. of Saskatchewan Inc.
If the speculation about MDA proves true, it means the company may be considering selling all or part of its "information products" division, which includes a real-estate software business and a geographic imaging business.
Should the real estate division be on the block, it would be the exact reversal of what played out two years ago when MDA's space division suffered from slow growth and its real-estate software was in heavy demand. Those trends have done a switch since the real-estate market plummeted and MDA's space business rebounded after winning contracts for satellites for Ukraine and Russia, worth about $500-million.
A sale of one side of the two-pronged business would be a smart move and something to which the company should give "serious consideration," said analyst Stephen Li of Raymond James. "From an investor's perspective, one of the challenges with [MDA]is, 'You guys are too complicated.' "
One sticking point to a potential sale might be settling on a price. MDA's real-estate software unit remains in freefall, so valuing that operation could prove difficult. In the first six months of 2009, the information products business, which includes the real-estate software unit, accounted for 58 per cent of revenue. In the same period in 2010, it accounted for 46 per cent; this year is also the first time since early in the decade that the space unit is generating more revenue than information products.
Despite the drop, Mr. Li expects management would only sell its real-estate software business "for the right price."
MDA's stock price has skyrocketed since its 2008 drop. Before the sale speculation came out Wednesday, shares were trading around $46; they jumped about 4 per cent on the news, pushing them close to $48.