While shareholders and analysts were applauding MacDonald Dettwiler and Associates Ltd.'s big U.S. acquisition two weeks ago, the company's largest shareholder took the opportunity to cash out a significant chunk of its holdings.
Securities filings show the Ontario Teachers Pension Plan Board sold 1.35 million MDA shares, or more than 30 per cent of its holdings, in open market transactions at $55 apiece on June 27. The stock closed up 28 per cent that day, on news that the Canadian space technology company would buy the satellite-manufacturing division of Loral Space and Communications Inc. for $875-million (U.S.).
Trading data from Bloomberg indicates Teachers sold more than 40 per cent of all MDA shares that traded hands that day.
The Teachers sale leaves the pension fund giant with 2.8 million shares, or 8.7 per cent of the stock. That's well down from the 10 million shares Teachers picked up from MDA's former controlling shareholder, Orbital Sciences Corp., in May, 2001, at $14 per share, a deal that gave it a key 29-per-cent stake in the Richmond, B.C.-based company. Since its share is now less than 10 per cent, Teachers is no longer considered an insider.
"We sold part of MDA position shortly after they announced their Loral acquisition," Teachers' spokeswoman Deborah Allan said in an e-mail to The Globe and Mail. "We saw the recent uptick in share price as an indication of the market's confidence in the acquisition and an excellent opportunity to realize gains on behalf of our members.
"We've a been a long-term shareholder of MDA and it's performed well for us. As you can see, we're still one of their largest shareholders, so also are still very supportive of the company and its management team."
Teachers has realized a huge profit on its initial $14-per-share investment as it reduced its holdings in MDA in chunks. It sold two million shares in April, 2002, for $27 per share, another two million shares for more than $47 in May, 2006, and 1.6 million shares for $53 last October.
The Loral deal comes four years after MDA tried to sell its space business to U.S.-based Alliant Techsystems for $1.3-billion after it had trouble winning deals with US government agencies such as NASA. But Ottawa blocked the deal on national security grounds, sticking MDA with a division that had limited opportunities in the U.S. due to its lack of presence there. Ottawa handed contracts to the company through the Canadian Space Agency, uintil government budget cuts slowed the flow of business to a trickle, forcing MDA to cut more than 150 jobs.
Meanwhile, MDA sold its real estate information business for $850-million in early 2011, bought back 23 per cent of its stock last October for $500-million and looked for acquisition opportunities in the U.S.
The Loral deal, which concluded that search, will help the company boost estimated earnings in 2013 by 50 per cent, according to some analysts, and give the company a platform to win upcoming space contracts from the U.S. government. Loral's satellite division is based in Palo Alto, Calif.