Satellite communications company Loral Space & Communications, Inc. (LORL: Quote) agreed Tuesday to sell its wholly-owned subsidiary Space Systems/Loral or SS/L, to essential information solutions provider MacDonald, Dettwiler and Associates Ltd. or MDA (MDA.TO: Quote) in a deal of just over $1.0 billion. The deal, unanimously approved by the boards of both companies, is expected to close in a few months.
Palo Alto, California-based SS/L is the global market leading provider of commercial communications satellites, and has a workforce of 3,200 highly skilled employees in the U.S. SS/L revenues for 2011 were $1.1 billion, and had a backlog of $2 billion as of March 31, 2012.
The proposed deal will create a leading global communications and information company, with combined annual revenues of $1.9 billion, and provide Richmond, Canada-based MDA a stronger presence in the U.S. market.
"This is a game changing transaction for our Company. With one move, we are bringing together two market leaders to create a unique global communications and information company with a strong commercial focus. Post-acquisition, more than two-thirds of MDA's total revenues will come from the commercial market," MDA's President and CEO Daniel Friedmann said in a statement.
The total consideration of $1.0 billion comprises $774 million in cash for equity of SS/L, $101 million for certain real estate, and more than $135 million of cash dividends and other payments. The consideration for the real estate is payable through bank guaranteed three year promissory note.
The transaction will be immediately accretive to MDA's earnings per share, with SS/L continuing to operate under its well-established brand and proven management team.
MDA will fund the proposed deal with cash on hand, the promissory note, and about $500 million of borrowings under a new $1.1 billion fully committed and underwritten credit facility from RBC Capital Markets.
Meanwhile, Loral and its board of directors plan to evaluate alternatives for returning to shareholders the after-tax proceeds resulting from the divestiture of SS/L.
"The combination of Space Systems/Loral's world-class commercial communications expertise with MDA's strengths in essential information solutions provides exciting opportunities for growth for the new company and continuous strong support to our current and future customers' business," said John Celli, president of Space Systems/Loral.
LORL closed Tuesday's regular trading session at $57.74, down $0.28 or 0.48% on a volume of 29,549 shares, while MDA.TO closed on the TSX at C$44.64, up C$0.94 or 2.15% on a volume of 70,397 shares.
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by RTT Staff Writer
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