TORONTO (Reuters) - The U.S. Committee on Foreign Investment on Thursday approved Loral Space and Communications Inc’s LORL.O move to sell its satellite manufacturing business to Canadian rival MacDonald, Dettwiler and Associates Ltd (MDA) (MDA.TO).
A big hurdle remains though, as the $875 million deal still needs to win approval from U.S. anti-trust regulators, who last week asked for additional information on the proposed deal, a request some analysts believe could jeopardize the timing of the deal and the likelihood of its closing.
MDA hopes the deal, struck in June, will boost its position in the communications market and help it win business from both commercial and government clients.
SS/L, Loral’s California based-subsidiary that MacDonald is acquiring, develops satellites used for television broadcasting, direct-to-home television services, broadband communications, military communications, wireless telephony and satellite radio, among other things.
The Committee on Foreign Investment in the United States, or CFIUS, found no national security concerns with respect to the transaction, MDA said in a statement late on Thursday.
National security issues were a crucial concern four years ago when the Canadian government blocked the C$1.33 billion ($1.36 billion) sale of MDA’s own satellite arm to U.S. rival Alliant Techsystems Inc ATK.N.
At the time, Canada said it feared that the sale of the MDA unit would have led to the loss of crucial technology and hampered its satellite surveillance capabilities. It marked the first time that the country used the powers of the Investment Canada Act to block a foreign takeover of Canadian assets.
MDA’s own bid for SS/L though appears to be up against more stringent scrutiny on the anti-trust front. The U.S. Department of Justice last week asked for more information about MDA’s own satellite communications antenna and payload business, which is a significant component supplier to the satellite industry.
The request spooked investors and led to a sell-off in MDA’s shares, which have fallen 14 percent in the last two weeks. The company’s shares, which rose significantly after the deal was announced in June, closed Thursday at C$51.60 on the Toronto Stock Exchange.
($1 = 0.9777 Canadian dollars)
Reporting by Euan Rocha; Editing by Daniel Magnowski and Matt Driskill