Canada blocks technology sale

Canada’s Conservative government has blocked the sale of the country’s biggest space technology business to Alliant Techsystems, bowing to a wave of protest against politically sensitive technology falling under US control.
It is the first time that Canada has rejected a foreign investment since the Investment Canada Act was passed in the late 1980s. Concerns are normally dealt with through behind-the-scenes negotiations, resulting either in conditions or the buyer withdrawing its proposal.
Jim Prentice, industry minister, said on Thursday he was not satisfied that Alliant’s proposed C$1.3bn ($1.28bn) purchase of the space division of Vancouver-based MacDonald Dettwiler “is likely to be of net benefit to Canada”.
MacDonald’s shareholders have already almost unanimously approved the deal. But opposition parties, trade unions and even some Conservative members of parliament have raised questions about allowing a jewel of Canadian technology to fall under foreign control.
Their objections centre on access to MacDonald’s Radarsat-2 satellite, which is poised to play an increasingly important role in helping Ottawa assert Canadian sovereignty over vast tracts of the Northwest Passage in the Arctic Ocean.
The claims are disputed by the US, among others.
MacDonald’s other products include the Canadarm, a robotic limb used on the space shuttle and the International Space Station. The Canadarm is often portrayed as a prime example of Canada’s technological prowess.
Both Radarsat-2 and the Canadarm were partly financed by the Canadian government.
Sensitivities north of the border have been heightened by Alliant’s role as a big supplier of weapons and ammunition to the US military. Alliant has said that MacDonald’s satellite technology will help expand its military business.
Under the Investment Canada Act, Alliant has 30 days to come up with alternative proposals. The company said on Thursday that “discussions with the Canadian government continue”.
Mike McCracken, an Ottawa-based consultant, said Alliant might be able to make the deal more palatable by guaranteeing Canadian access to the satellite, repaying some of the research and development funds, or selling part of itself to the Canada Pension Plan investment board.
MacDonald has defended the sale on the grounds that Ottawa’s spending on space research is not enough to support a company of its size, and that it needs greater access to US contracts to survive.
Its chief executive told a parliamentary committee last week that the government had “all the necessary powers and authority to ensure that in future it will continue to exercise full control over Radarsat-2”.
MacDonald Dettwiler shares tumbled almost 9 per cent in early trading on Thursday.
Copyright The Financial Times Limited 2008