(Corrects premium in paragraph 4 to “2.8 percent” from “18.2 percent” and stock closing price to “$34.05” from “$34.04”)
By Aishwarya Venugopal
Feb 24 (Reuters) - Canada’s MacDonald Dettwiler and Associates Ltd, a provider of satellite data used for surveillance and communications, said it would buy U.S.-based DigitalGlobe Inc for about C$3.10 billion ($2.40 billion) to strengthen its position in the satellite imagery market.
DigitalGlobe’s satellites help provide high-resolution images to its customers such as the U.S. Department of Defense and companies including Facebook Inc and Uber Technologies Inc.
MDA said DigitalGlobe shareholders will get $17.50 in cash and 0.3132 of its shares for each share held.
The offer translates to $35 per share based on its stock’s closing pricing on Feb. 16, before reports of a potential deal emerged, MDA said. That represents a premium of 2.8 percent to DigitalGlobe’s Thursday close of $34.05.
Shares of DigitalGlobe were trading down 7.5 percent at $31.50 in early trading on Friday. MDA’s shares were marginally higher at C$69.29.
Investors had expected a premium from the stock’s Thursday close and not a premium based on the stock’s close before reports of a potential deal, Ashwini Birla of Dougherty & Co LLC said.
“I am guessing DigitalGlobe investors are exiting gracefully.”
The deal includes assumption of DigitalGlobe’s debt of C$1.60 billion and is expected to close in the second half of 2017.
MDA, which restructured its U.S. operations in 2016, said it would apply to list on the New York Stock Exchange as well and look to incorporate the ultimate parent of DigitalGlobe in the United States by the end of 2019.
“The transaction is a major step forward in our previously announced U.S. Access Plan,” MDA’s Chief Executive Officer Howard Lance said in a statement.
“We are committed to serving the U.S. Government as a mission-critical partner with an expanded portfolio of end-to-end solutions,” he said.
Lance will lead the combined company.
DigitalGlobe, which will remain headquartered in Westminster, Colorado, gets over 62 percent of its revenue from contracts with the U.S. government.
Analyst Bill Baker of Garp Research & Securities, however, said it seemed “strange that an asset so important to the United States would be sold to a foreign company”.
DigitalGlobe in 2014 used crowdsourcing to search for a missing Malaysia Airlines jetliner, inviting internet users to comb through satellite images of over 1,200 square miles (3,200 square km) of seawater for signs of wreckage.
MDA said the deal is expected to bring C$75 million-C$150 million in run-rate synergies by 2019 and add to its operating earnings per share in 2018.
BofA Merrill Lynch is the financial adviser to MDA, while PJT Partners and Barclays are advising DigitalGlobe. (Reporting by Narottam Medhora and Aishwarya Venugopal in Bengaluru; Editing by Shounak Dasgupta and Sriraj Kalluvila)