Monday January 6, 2020 0 comments
The company said it expects to use proceeds to reduce leverage and improve its capital structure to prioritize investments for growth in its core areas of Earth intelligence and space infrastructure.
The transaction includes all of MDA’s Canadian businesses, encompassing ground stations, radar satellite products, robotics, defense and satellite components representing approximately 1,900 employees.
These businesses were expected to generate approximately $370 million in 2019. This revenue is inclusive of approximately $78 million of intercompany sales to other Maxar entities, the company said.
Following the completion of the transaction, the MDA team will operate as a stand-alone company within NPC’s portfolio, retaining its name and standing as the leading space and defense company in Canada.
MDA said it expects to continue to supply Maxar with certain components and subsystems, and the companies expect to sell each other’s complementary satellite data.
“The sale of MDA furthers execution on the company’s near-term priority of reducing debt and leverage,” said Dan Jablonsky, Maxar CEO.
“It also provides increased flexibility, range and focus to take advantage of substantial growth opportunities across Earth intelligence and space infrastructure categories.
“After the transaction is complete, Maxar will retain leading capabilities in geospatial data and analytics, satellites, space robotics, and space infrastructure, and we will continue to have strong alignment with our defense and intelligence customers, the evolving requirements of civil governments, and the pursuit of innovation seen in the commercial marketplace.
“We thank the talented employees of MDA, who have built a world-class business with unique capabilities, and we look forward to working with them as a commercial partner and component supplier to Maxar going forward.”
“This transaction — when combined with the recently completed sale of real estate in Palo Alto — reduces Maxar’s overall debt by more than $1 billion and significantly reduces Maxar’s leverage ratio,” said Biggs Porter, Maxar CFO.
“Also, the loss of future cash flow from MDA will be significantly offset by interest savings from the reduction of debt. We expect the net effect of all these factors to only reduce our prior guidance for adjusted EBITDA and free cash flow generation in the 2022 to 2023 time period by approximately $50 million.
“While the sale of MDA will re-baseline the size of the overall company, we continue to expect significant adjusted EBITDA and free cash flow growth over the next several years as the Legion constellation construction spend completes and the constellation comes online, services executes on its growing backlog, and space infrastructure sees improved profit and cash flow driven by recent re-engineering efforts and new program wins.”
The completion of the transaction is conditioned on regulatory approvals, including review by the Committee on Foreign Investment in the United States, Hart-Scott-Rodino review by the U.S. Department of Justice and the U.S. Federal Trade Commission, and Canadian government reviews under the Radiocommunications Act and the Competition Act.
PJT Partners, RBC Capital Markets, and Bank of America Merrill Lynch are serving as financial advisors to Maxar. Wachtell, Lipton, Rosen & Katz and Stikeman Elliott LLP are serving as the company’s legal advisors for this transaction.