Richmond’s MacDonald, Dettwiler and Associates Ltd. (TSX: MDA) is selling its property information division for $850 million to San Francisco-based private equity firm TPG Capital.
MDA’s automated property information is used by insurance companies, lenders and legal professionals, primarily in the United States and Europe.
TPG Capital, which was founded in 1992, has $47 billion of capital under management across a family of funds.
“Our property information business was built on the strengths of our information solutions competencies,” MDA’s CEO Dan Friedmann said in a release. “We determined that this business should operate under separate ownership going forward if we could crystallize good value.”
He said the deal provides an “excellent” return on the investments that MDA has made in its property information business over the past decade.
MDA’s property information division generated third-quarter revenue of $121 million, which was consistent with revenue in 2009’s third quarter. Revenue from its space division was $142 million last quarter compared with $112 million for 2009’s third quarter.
MDA’s insurance information business in the U.S. has a relationship with one of TPG’s complementary businesses.
MDA will use some of the proceeds from the pending sale to bring some of the technologies in its space and surveillance division back down to earth.
Friednmann told BIV Friday afternoon, following the announced sale, that MDA will create a new division to sell its space and surveillance technologies and services to commercial industries.
“We already have a nascent business in a number of commercial areas,” said Friedmann. “We work with oil and gas companies, we have equipment in mines and we’ve done stuff in the nuclear industry
“We know from doing that work that those industries and those commercial markets have a lot of need for our capabilities, but we’re not that strong in those markets, so we’re looking for acquisition opportunities to become a bigger force.”
Sale of its property information division is a reversal of direction from two-and-a-half years ago when MDA tried to sell its space and surveillance division – which the company refers to as information systems – and retain its property information division. The federal government, citing national security concerns, blocked that sale.
“What happened two and half years ago, was very simple,” said Friedmann. “We could not see a future for our [information] systems business with Canadian owners because the Canadian government was not investing in space and was actually procuring defense equipment from the U.S., sometimes not allowing us to even compete.”
Without sales in its domestic market, the company had difficulty selling space and surveillance technologies to international markets.
“The only thing that changed was that due to public opinion, the government reversed its policies,” said Friedmann. “It’s spending money on space. It’s allowing us to bid on defense and, therefore, business is booming.”
He said that although the federal government has laid out a clear surveillance strategy for Canada, with investments in the RADARSAT Constellation, it has not done so for space exploration and robotics.
Reflecting how far behind Canada is in space exploration he noted that the Canadarm – the company’s flagship invention - was financed 25 years ago.
Regarding the pending sale of its property information division, he said the two divisions did not fit well together because shareholders were conflicted on which business the company should focus on.
The sale is expected to close early next year.
TPG said the deal has fully committed equity and debt financing.