Canada’s space sector is made up of over 200 private companies, research organizations, universities, as well as government departments and agencies.
The sale of Canada’s second largest space firm, Com Dev, to Honeywell International went through without a hitch.
That is a significant change from 2008 when another U.S. company tried to buy a major player in Canada’s space industry. Alliant Techsystems’ attempt to acquire MDA Corp., Canada’s largest space firm, sparked national protests, debates in the House of Commons, and ultimately the refusal by the Canadian government to allow the deal to proceed.
But space industry and defense analysts, as well as those who led the charge against the MDA acquisition seven years ago, are now left wondering why the Canadian government stood on the sidelines this time around and let the Com Dev sale proceed.
“Com Dev possesses key technology for our national security yet this sale was allowed to go through without any government scrutiny,” said Walter Dorn, a professor at the Royal Military College of Canada. “This was something that shouldn’t have been allowed.”
Dorn and other analysts suggest that Honeywell’s 455 million Canadian dollar ($345 million) purchase of Com Dev sailed through without any opposition because of its timing and the corresponding circumstances in the country’s political system.
News that Com Dev was up for sale came in early October as Canada was in the midst of a heated federal election. The Conservative Party government of Prime Minister Stephen Harper was fighting for its political life as the Liberal Party, led by Justin Trudeau, was gaining in popularity.
The Conservative government, which in recent years had embarked on a policy of trying to strengthen Canada’s defense and aerospace industries, had earlier put the brakes on the MDA sale.
That was, at the time, a popular move with the public. MDA was, and is, considered the backbone of Canada’s space industry and over the years the Canadian government had pumped hundreds of millions of dollars into the firm to build it up as the country’s premier space technology firm.
Under the deal, Alliant Techsystems of Minneapolis, also would have become owner of the then recently launched Radarsat-2 satellite, a spacecraft the Canadian government had contributed 420 million Canadian dollars to developing and building. That investment helped garner intense opposition to the deal in Parliament and among politicians in all parties.
But the sale of publicly lesser known Com Dev came as the Conservatives were occupied trying to be re-elected. Parliament was not in session. In addition, during a federal election, the machinery of the Canadian government tends to slow down since only the most critical decisions are made. Those federal government bureaucrats, who should have raised warning signs about the Com Dev sale, didn’t act, said Steve Staples, vice president of the Ottawa-based Rideau Institute, which was instrumental in 2008 in leading opposition to the MDA sale.
“This flew completely under the radar for the public and politicians,” explained Staples. “This purchase is just as significant as Alliant’s attempt to buy MDA but the timing on this acquisition couldn’t have been better for the companies.”
Alliant Techsystems, better known as ATK, merged its aerospace and defense groups with Orbital Sciences Corp. in 2015 to become Orbital ATK.
Staples noted that Com Dev announced Nov. 5 that Honeywell International of Phoenix, Arizona, intended to buy the firm; just the day before the new, and largely inexperienced, cabinet ministers of the Liberal Party government were sworn into their portfolios.
Com Dev became part of Honeywell just over three months later, Feb. 4, and those cabinet ministers are still learning their jobs, their staff readily acknowledge. The new government’s main focus is fulfilling its top election promises which included removing Canadian combat forces from Iraq and bringing in 25,000 Syrian refugees from the troubled Middle East, Prime Minister Justin Trudeau has pointed out.
That doesn’t mean, however, that the Liberal Party government didn’t have the ability to stop the Com Dev sale.
Back in 2008, the Conservative government had put a halt to the purchase of MDA by using the country’s investment regulations. Such a sale required a review by government and the Conservatives determined that the sale of MDA would not be “a net benefit” to Canada.
An official with Canada’s Innovation, Science and Economic Development department noted that the $455 million purchase price for Com Dev falls below the $600 million level that would legally require such a review.
However, under the investment regulations the Canadian government could have still reviewed the purchase and vetoed the deal if it believed the acquisition could undermine national security, noted Michael Byers, a political science professor at the University of British Columbia. He called the Com Dev sale a potentially significant loss to Canada but added the extent of that can’t be determined since no government review was conducted.
The Liberal Party government, which had until Jan. 4 to make that determination, decided not even to examine the Com Dev purchase file.
A spokesman for Navdeep Bains, Canada’s Minister for Innovation, Science and Economic Development, declined to comment about the reasons why the minister did not allow a review to proceed.
The Rideau Institute’s Staples said because of Com Dev’s significant involvement in the country’s space program and Canadian military operations the security review should have been automatic.
The firm, founded in 1974, estimates its technology is used on more than 950 spacecraft to date, including 80 percent of all commercial communications satellites ever launched. It employs 1,250 people in Canada, the United Kingdom, the United States, China and India. More than 800 of those are in Canada.
Com Dev is a key player on Canadian military space programs, including on the Canadian Forces first operational satellite, called Sapphire. It is also involved in the Canada’s Medium Earth Orbit Search and Rescue (MEOSAR) satellite project, which will provide repeaters to be installed on the U.S. Air Force’s GPS 3 satellites.
Com Dev is also the prime contractor on the M3MSat, funded by Canada’s Defence Department, the Canadian Space Agency, and the company itself.
In a November conference call with investors, Com Dev Chief Executive Mike Pley said Honeywell would offer the firm new markets in defense and civilian space projects.
But what is good for both Com Dev and Honeywell, isn’t necessarily a positive move for Canada, point out Byers and Staples.
“Will Canadian jobs and technology be lost to the U.S.?” asks Staples. “What impact will this have on our national security? We’re flying in the dark on this one because the Canadian government didn’t do its job and ask those questions.”