Canada blocks sale of MDA satellite unit to U.S.

Thu Apr 10, 2008 4:43pm EDT
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By David Ljunggren

OTTAWA (Reuters) - The Canadian government said on Thursday it had blocked the $1.325 billion sale of sensitive satellite technology to U.S. rocket-maker Alliant Techsystems Inc <ATK.N in part because it feared it might lose control over top-secret images.

The move marked the first time Ottawa had prevented the sale of a domestic firm to a foreign buyer.

Critics said the proposed sale by MacDonald Dettwiler and Associates Ltd MDA.TO would threaten Canadian sovereignty by handing the high-tech Radarsat 2 satellite to a foreign firm.

"Certainly ... where jurisdictional law would sit for the satellite post-transaction is a relevant consideration," Industry Minister Jim Prentice told reporters.

In a terse two-page letter to Alliant Tech on Tuesday, Prentice said: "I am not satisfied that your investment is likely to be of net benefit to Canada" and gave the firm 30 days to contest the decision.

Opponents say the sale could result in Washington ordering Alliant Tech not to let Ottawa see data from the satellite, such as images revealing whether U.S. ships were sailing through Arctic waters. Washington rejects Canada's claim to sovereignty over Arctic sea passages, which it says are international waters.

Prentice's comments -- and the strong backing he earlier received from Prime Minister Stephen Harper in Parliament -- indicate that however Alliant Tech proposes to restructure the deal, it will not be allowed to buy the satellite technology.

"I would think it would be very difficult for the government to flip-flop on this issue," said Scott Brison, a legislator for the opposition Liberal Party.   Continued...