Canadian space technology firm MacDonald, Dettwiler and Associates (MDA) is to sell its property-information business to private equity firm TPG Capital in a deal that will net the company approximately C$850m.
Proceeds from the transaction, which is…
Canadian space technology firm MacDonald, Dettwiler and Associates (MDA) is to sell its property-information business to private equity firm TPG Capital in a deal that will net the company approximately C$850m.
Proceeds from the transaction, which is expected to close early in the New Year, are to be held until MDA completes the review of its long-term business strategy and its future cash requirements have been fully evaluated.
MDA’s chief executive Dan Friedmann stated that this future strategy will predominantly be focussed on growing its core space business. “Going forward we will leverage our core strengths to further diversify our growing information systems and geospatial services business into commercial and international markets.”
“As we have done in the past, we will continue to create shareholder value through a combination of organic growth and acquisition initiatives,” Friedmann said.
While the company has no immediate plans to spend the sale proceeds, it did announce that its board of directors has adopted a dividend policy of C$1 per share from operating cash to be paid in two equal instalments of C$0.50 per share on or about 31 March and 30 September, starting in 2011.
Founded around 2000, the property-information business provides services to insurance companies, lenders and legal professionals.
The unit, which is principally located in the US and the UK, grew rapidly during the housing boom but over the past couple of years has suffered declining revenues as the market deteriorated. Between 2007 and 2009, annual sales fell by almost C$300m.
Commenting on the deal in a conference call, Friedmann said: “The reason for this transaction is that, based on our own assessment and ongoing dialogue with our stakeholders, we determined that the property information business is sufficiently mature and different from the rest of our business to operate under separate ownership.
“Our property information business was built on the strengths of our information solutions competencies. We determined that this business should operate under separate ownership going forward if we could crystallize good value. This transaction provides an excellent return on the investments we have made in the property information business over the past decade.
“The process we followed was to identify the best buyers for the business based on their ability to finance, and their intent to continue to operate and grow the business.
“We solicited appropriate candidates with an interest in this market and those with complementary strategic assets. We short-listed the candidates, and then selected TPG.”
To aid in this ‘ability to finance’ the transaction, MDA’s lead financial adviser BoA Merrill Lynch provided staple financing for the buyout. To that end, TPG Capital has secured a fully underwritten debt financing via BoA Merrill Lynch, RBC Capital Markets and Highbridge Mezzanine Partners. The MDA board of directors also retained BMO Capital Markets to provide financial advice and a fairness opinion on the sale.
Speculation that MDA was considering a sale arose in late October with a number of reports alleging that the company was exploring whether to sell part or all of the group. In response, MDA issued a statement insisting that, while the group continues to look at strategic alternatives, it is “not evaluating a sale of its systems division or any portion thereof”. This, of course, neglected to mention its property information business.
