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Report On Business Com Dev passes last major hurdle for sale to U.S. tech giant Honeywell

A view of the corporate sign outside the Honeywell International Automation and Control Solutions manufacturing plant in Golden Valley, Minn.

ERIC MILLER/REUTERS

Canadian satellite equipment maker Com Dev International Ltd. has passed the last major hurdle for its sale to U.S. technology conglomerate Honeywell International Inc.

On Thursday, Com Dev shareholders voted 99.3 per cent in favour of the $455-million deal, which will see Com Dev sell its space hardware business to Honeywell, while spinning off a unit that markets ship-tracking information gathered from Com Dev satellites.

The Cambridge, Ont.-based company has already received the approvals it needs from U.S. and Canadian regulators. The transfer of the satellite business to Honeywell was not subject to a "net benefit" review under the Investment Canada Act – which deals with sales of Canadian firms to foreign entities – because the deal was below a $600-million threshold.

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It could have been reviewed under separate "national security" provisions of the Investment Canada Act, but the federal government decided not to conduct that review.

The sale now just needs court approval, expected next week, and is set to close early in February.

Michael Byers, a political science professor at the University of British Columbia, said the sale of Com Dev's satellite business is a "potentially significant loss to Canada." It is difficult to know how big a loss it is, however, because there was no federal review.

A spokeswoman for Navdeep Bains, the federal minister Innovation, Science and Economic Development, told The Globe and Mail in December that confidentiality provisions of the Investment Canada Act preclude any comment about the national security issue.

Prof. Byers said Com Dev has been involved in the construction of Canadian military satellites. The sale to Honeywell could mean that future Canadian satellites might have to be built from parts sourced from non-Canadian companies, he said, and "that, at least potentially, is a national security concern."

He noted that in 2008 the Conservative government used the Investment Canada Act's net benefit rules to halt the sale of MacDonald Dettwiler and Associates Ltd.'s space arm to Minnesota-based Alliant Techsystems Inc. for $1.3-billion. That move was prompted partly by concerns that the technology in the Radarsat-2 remote-sensing satellite, which tracks Canada's Arctic, would fall into U.S. hands.

After that controversial decision, the government introduced the national security provisions to give Ottawa a more precise option to review deals that might generate security concerns, instead of having to use the broad net-benefit test.

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Prof. Byers said the fact that the deal was announced in November, just after the election of the new government of Justin Trudeau, may have been a factor. "One has to think that if the government had been in place for 12 months, this situation would have received closer attention," he said. "The timing was bad from the perspective of the Canadian national interest."

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