Alliant deal for satellite unit dead

The Canadian government dealt Alliant Techsystems Inc. a major blow Friday, denying its request to acquire the satellite business of Toronto giant MacDonald, Dettwiler & Associates (MDA) for $1.3 billion.

The denial means the once highly anticipated acquisition will instead result in Alliant taking a $6.6 million charge to fourth-quarter earnings to cover "transaction-related expenses." The news comes one day after Alliant posted record fourth-quarter earnings and upgraded its forecast for fiscal 2009. The forecast did not include MDA projections, so it will not change as a result of Canada's decision, company officials said.

"The Canadian objection relates to potential extraterritorial application of U.S. export law," Alliant Techsystems officials said. Canada warned Alliant last month that it was not convinced that the deal would benefit the country. Alliant appealed, but Friday's response ends the discussion.

Some analysts said that the rejection was all about Canadian pride and security concerns. MDA is highly regarded for its commercial and military satellite data-collection services and its high-resolution RadarSat-2 satellite, which launched in December. In addition, the company has received more than 10 years of investment and research help from the Canadian government.

Analysts speculated that the time, prestige and money the government invested in RadarSat-2 unleashed a firestorm of controversy within Canada. MDA workers vehemently opposed the acquisition from the beginning, and launched protests and hounded legislators to nix the deal.

Some Canadians also expressed concerns about losing control of the polar-orbit satellite to a territorial rival, as Canada and the United States claim rights to parts of the Arctic Ocean.

Another point of national pride is MDA's robotic "Canadarm" device, which moves satellites around for NASA's space shuttle and for the international space station.

Had the deal gone through, it would have given Alliant its first international company and the ability to make every part of a satellite for the first time.

"It will be interesting to see what will happen now, since ATK [Alliant] has $1.3 billion that was intended for the acquisition," said Darcy Wegh, an analyst for Vanguard Marketing International. "The question now is, will they use the money to pay down debt, or will they start looking at another acquisition -- perhaps this time in the United States?"

There was no break-up fee for Alliant, so it won't be penalized financially by the rejection, Wegh said.

At the time of the original announcement in January, Alliant CEO Dan Murphy said, "This acquisition is a big deal for us. ... We have been working toward this for a number of years, and are glad to bring it home."

Friday, Murphy and other officials said that they were disappointed that the deal fell apart. However, they said Alliant will continue to pursue "a disciplined capital deployment strategy" that includes strategic acquisitions, debt repayment and share repurchases.

Alliant Techsystem stock fell nearly 1 percent Friday, to close at $111.00.

Dee DePass • 612-673-7725