Alliant Techsystems will buy Canadian satellite giant

Defense firm Alliant Techsystems Inc. of Edina has agreed to buy a sizable chunk of the Canadian satellite giant MacDonald, Dettwiler and Associates for $1.33 billion in cash.

The sale of MDA's information systems and geospatial information services divisions to Alliant was announced after the market closed Tuesday. The deal, which is expected to become final in April, means Alliant for the first time will have the ability to make every part of a satellite in-house.

The purchase also is Alliant's first international acquisition and its largest -- double the $685 million it paid for rocket booster firm Thiokol in 2001.

Alliant will gain 1,900 employees, about $500 million in revenue, significant international operations and new technological capabilities from MDA.

"This acquisition is a big deal for us," said Dan Murphy, Alliant's CEO. "We have been working toward this for a number of years and are glad to bring it home."

MDA will also bulk up the parts of Alliant's business that come from nondefense work, a move that one analyst said could make Alliant less vulnerable to a takeover itself.

MDA has significant operations in Toronto, Vancouver, Montreal and Halifax, and engineering and robotics facilities in Houston, near NASA's Johnson Space Center. MDA also has ground stations that collect and analyze satellite data in 35 countries.

"No, [the deal] is not at all a reflection of a belief in a defense slowdown. We don't see that." Murphy said. "It is a continued expansion of the core. ... What we are now doing with space provides greater diversification in customers and products and [geographies], and that is always a good thing."

Speaking from New York, Murphy said Alliant will be able to provide "more [satellite] content than we had in the past" to industry leaders such as Lockheed Martin, Boeing, Northrop Grumman and Raytheon as a result of the MDA deal.

"The entire series of satellite constellations that support the U.S. Department of Defense is aging badly and has to be replaced," Murphy said. "We intend to be a big part of that by supporting large contractors."

That business could help turn Alliant, which now has $4 billion in annual revenue, into a $5 billion company more quickly than had been expected.

"Less than two years ago we were less than $2 billion in sales," Murphy said. "Yet, we will be closing in pretty close to $5 billion next year with this acquisition. That is about a year ahead of the schedule."

The companies have nice synergies, analysts noted.

MDA is best known for its commercial and military satellite data collection services, its high resolution "RadarSat-2" satellite that launched last month and its robotic "Canadarm" device that moves satellites around for NASA's space shuttle and the International Space Station.

MDA's RadarSat technology is advanced and expected to be of great interest to the Defense Department because it uses space-based radar that can identify trucks, trains and cars with the help of sophisticated, high-resolution satellites.

Alliant spokesman Bryce Hallowell said the company will combine MDA and its other satellite operations under a new business group called ATK Space Systems. It will have $900 million in sales and be headed by former orbital sciences general manager Carl Marchetto. No layoffs are planned.

MDA "is a really significant player in the Canadian aerospace world." Hallowell said. "The whole goal is to take their capabilities and introduce them into the U.S. market."

Alliant is "highly concentrated in a handful of business lines, mainly in rocket motors and ammunition. They need to diversity not just in the sense of new technology but also in the sense of new markets overseas."

He said the MDA business could make up for potential revenue gaps after the United States eventually decreases its presence in Iraq.

Thompson also said that MDA will make it tougher for Alliant to become a takeover target.

Alliant "could have been a takeover candidate to one of the large defense characters," Thompson said. "This would make it more complicated for a potential suitor to acquire [Alliant] because it's becoming a conglomerate rather than just a tightly focused business."

Alliant's stock closed Tuesday at $108.92, down $1.27.