MDA’s DigitalGlobe buy: What’s the fineprint

Canada-based MacDonald Dettwiler and Associates (MDA) finally announced on February 24 it would acquire American satellite imagery provider DigitalGlobe Inc for about C$3.10 billion. Here are some of the moot points of the significant acquisition.

• Valued at $2.40 billion, this is the biggest deal yet in a fast-consolidating earth-imaging satellite market.
• MDA will offer $17.50 in cash and 0.3132 of its share for each DigitalGlobe share held.
• Purchase price represents an 18% premium above DigitalGlobe’s unaffected closing share price of $29.60 on the NYSE on February 16, 2017.
• MDA Chief Executive Howard Lance will lead the combined company. Lance was appointed MDA CEO in 2016 shortly after he joined the company. It would be interesting to note that Lance is a US citizen, and from 2003-2011 served as Chairman and CEO of Harris Corporation , an American technology company, defense contractor and IT services giant.
• Three members of the DigitalGlobe Board will be appointed to the MDA Board.
• The DigitalGlobe name, brand, logo, and headquarters in Westminster, Colorado will be maintained. The combined entity will have about 4,600 employees in the US and over 1,800 in Canada.
• MDA has restructured the company over the last year so that all of its US operations come under SSL MDA Holdings.
• DigitalGlobe will operate as a stand-alone division of SSL MDA Holdings, under the recently signed Security Control Agreement with the US Department of Defense.
• SSL MDA Holdings is the US operating company of MDA and it was done under the guidance and approval of the DOD.
• The goal is to get ultimate parent of DigitalGlobe incorporated in the US by 2019 end.
• MDA will apply to list its shares on the New York Stock Exchange in addition to its current listing on the Toronto Stock Exchange.
• The deal is expected to close in the second half of 2017 subject to customary security and regulatory clearances.
• The terms and conditions of the deal provide for MDA paying a reverse termination fee of $150 million to DigitalGlobe if the deal is blocked by the Committee on Foreign Investment in the United States (CFIUS), or by any government agency.
• If either of the companies go back on the deal, they will have pay a termination fee of $85 million.

• MDA’s technology, used in satellites and ground stations, will help enhance DigitalGlobe’s imagery and analytics services, and enable the combined company to expand its industry-leading portfolio.
• For shareholders of the combined company, the deal offers immediate scale, resources and technology to serve increasingly complex needs of government and commercial customers.
• The deal includes assumption of DigitalGlobe’s debt of $1.60 billion, which is expected to add to MDA’s operating earnings per share in 2018.
• MDA said the deal is expected to bring C$75 million-C$150 million in run-rate synergies by 2019 and add to its operating earnings per share in 2018.
• After the news, DigitalGlobe scrip fell as much as 7.9% to $31.35 — its biggest intraday percentage loss in more than three months – while MDA shares climbed while MDA shares were down 4.2% at C$64.77.