Ottawa will not review the sale of Canadian satellite equipment maker Com Dev International Ltd. under national security provisions of the Investment Canada Act, paving the way for the company to be taken over by U.S. giant Honeywell International Inc.
The $455-million proposed sale is below the $600-million threshold for review under the "net benefit" provisions of the act, but the government could have reviewed it under other provisions that allow Ottawa to look at takeovers that might raise national security concerns.
Honeywell notified the Department of Innovation, Science and Economic Development of its proposed acquisition in mid-November, and the department had 45 days to tell the company if a national security review was coming. "The period for national security review under the Investment Canada Act expired at midnight [Jan. 4], so we are now clear under the ICA," Honeywell spokesman Steve Brecken said in an e-mail Tuesday.
That means Ottawa will not attempt to block the satellite company's sale, the way it did with another satellite firm – MacDonald Dettwiler and Associates Ltd. – in 2008.
At that time, the Conservative government used the net benefit rules to halt the sale of MDA's space arm, which was to be purchased by Minnesota-based Alliant Techsystems Inc. for $1.3-billion. That unprecedented 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.
Then-industry minister Jim Prentice and then-prime minister Stephen Harper said they were protecting Canada's economy and sovereignty by stopping the deal.
Com Dev is smaller than MDA, but it is in a similar business – making specialized equipment for satellite contractors and government space agencies.
Michael Byers, a political science professor at the University of British Columbia, said he is "mystified" that Ottawa will not look at the Com Dev sale under the national security provisions.
Those were introduced, he said, to give the government a more precise option to review deals that might generate security concerns, instead of using the broad net-benefit test that the Harper government had applied when Ottawa blocked the sale of another satellite firm – MacDonald Dettwiler and Associates Ltd. – in 2008. "It seems like the national security review was introduced precisely for a situation like this," Prof. Byers said.
Com Dev has worked as a contractor on Canadian government projects such as the Sapphire military satellite that was launched in 2013.
When Com Dev announced its plans to sell its space hardware business to Honeywell in mid-November, it also said it will spin off an arm that markets ship-tracking information gathered from Com Dev's own satellites. That division, called exactEarth Ltd., will become a separate company partly owned by current Com Dev shareholders.
The Com Dev sale to Honeywell requires approval from Canada's competition commissioner, and it will face a vote of Com Dev shareholders on Jan. 21. Honeywell hopes to close the deal by the end of the first quarter.