February 28, 2017 -- San Francisco and Westminster, Colo. - MacDonald, Dettwiler and Associates Ltd. ("MDA") (TSX: MDA), a global communications and information company providing technology solutions to commercial and government organizations worldwide, and DigitalGlobe, Inc. ( DigitalGlobe ) ( NYSE: DGI), the global leader in Earth imagery and information about our changing planet, today announced they have entered into a definitive merger agreement, pursuant to which MDA will acquire DigitalGlobe for US$35.00 per share in a combination of cash and stock. The transaction values DigitalGlobe at an equity value of approximately C$3.1 billion (US$2.4 billion), and an enterprise value of C$4.7 billion (US$3.6 billion), including assumption of DigitalGlobes C$1.6 billion (US$1.2 billion) in net debt. The transaction has been unanimously approved by the boards of directors of both companies, and is expected to close in the second half of 2017.
Under the terms of the agreement, each DigitalGlobe common share will be exchanged for US$17.50 in cash and 0.3132 MDA common shares, representing a per share value of US$17.50 based on MDAs unaffected closing share price of C$73.40 on the Toronto Stock Exchange (TSX) on February 16, 2017, the day prior to market speculation about a potential combination, and a C$/US$ exchange ratio of 0.7612. The total cash and stock per share value consideration represents an 18% premium based on DigitalGlobes unaffected closing stock price on the New York Stock Exchange (NYSE) on February 16, 2017.
The combination will bring together complementary space-related capabilities, creating a stronger company uniquely positioned to capture growth in the U.S., Canadian and global Earth observation and geospatial services markets given its ability to provide complete, end-to-end space systems, earth imagery and geospatial solutions. Together, the combination will leverage a full suite of space-related capabilities, including communications and Earth observation satellites and robotics, ground stations, integrated electro-optical and radar imagery, and advanced data analytics. Additionally, the combined company will lead in cloud-based information services that allow commercial and government customers worldwide to better understand activity across the changing planet.
As part of the transaction, MDA will apply to list its shares on the NYSE in addition to the TSX. Upon completion of the transaction, the combined Company will continue to execute its U.S. Access Plan strategy. This will include further reorganization of all or part of the combined Companys corporate and operating structure to ensure that the ultimate parent of DigitalGlobe is incorporated in the U.S. by the end of 2019, subject to customary approvals. MDA undertook a corporate reorganization in 2016 that included the formation of SSL MDA Holdings, Inc. ( SSL MDA Holdings ), the U.S. Operating Company of MDA, under the guidance and approval of the U.S. Department of Defense (DoD). SSL MDA Holdings currently operates under a Security Control Agreement (SCA) with DoD, allowing it to pursue and execute U.S. Government programs that require security clearances.
Todays announcement creates a new company that will lead the industry, offering space systems and imaging solutions from inception to execution, able to make design decisions with our customers needs in mind, said Howard L. Lance, president and chief executive officer of MDA. This combination has the scale, resources and technology to serve the large and increasingly complex needs of government and commercial customers globally. By combining MDA and DigitalGlobe, we are significantly expanding our total addressable market by broadening both companies capabilities and facilitating future growth.
Lance continued, MDA remains fully committed to its enduring and valued partnership with the Canadian Government and our Canadian employees. This combination offers the opportunity to deliver future economic and job growth in both Canada and the United States, as we focus on driving sustainable revenue expansion from our investments and create value for all our stakeholders.
Lance further stated, The transaction is a major step forward in our previously announced U.S. Access Plan. We are committed to serving the U.S. Government as a mission-critical partner with an expanded portfolio of end-to-end solutions. DigitalGlobe will operate as a stand-alone division under SSL MDA Holdings, in the same way as SSL and MDAs Canadian businesses.
Jeffrey R. Tarr, president and chief executive officer of DigitalGlobe, said, Following a thorough review of strategic alternatives, we believe that joining forces with MDA will enable us to deliver more value to our customers, expand opportunities for our team members and maximize value for shareowners. This compelling transaction will deliver immediate cash value to shareowners with further upside through ownership in the combined entity, position DigitalGlobe to reach its next phase of growth and provide greater opportunities for our team members by being part of a larger, more diversified company.
Tarr continued, Upon completing the transaction, DigitalGlobe will accelerate our vision of being the leading source of information about our changing planet. We look forward to working with the MDA team to ensure a seamless transition and to realize the potential of this exciting combination.
COMPLEMENTARY CAPABILITIES AND UNMATCHED SERVICES
MDA is one of Canadas leading technology companies, and has provided government and commercial customers with innovative space systems and solutions for decades. Since its founding more than 60 years ago in Palo Alto, Calif., MDAs subsidiary company SSL (Space Systems Loral) has been the recognized global leader in communications satellite design and manufacturing. SSLs global customers operate more than 85 communications satellites in geostationary orbit. SSL also produces small satellites for Earth observation and communications applications. In addition, SSL executes programs for NASA and other U.S. Government agencies, and was recently awarded two U.S. Government spacecraft program contracts for NASA, including Restore-L and Psyche. MDA Information Systems, based in Gaithersburg, Md. and Ypsilanti, Mich., is a leading provider of geospatial processing solutions and mission systems to U.S. Government and commercial customers. MDA in Canada is the leading supplier of radar satellites, geospatial services, integrated systems and robotics to the Canadian Department of National Defence (DND), the Canadian Space Agency (CSA) and commercial customers through its operations in Vancouver, Toronto, Montreal, Ottawa, and Halifax.
DigitalGlobe brings to the combined company the industry's most sophisticated satellite imaging constellation, a 17-year time-lapse image library, a world-class ground infrastructure, and a growing ecosystem of geospatial content producers and consumers leveraging artificial intelligence and machine learning to address complex global problems at scale. DigitalGlobe recently acquired The Radiant Group, which dramatically expands its capabilities in advanced geospatial expertise and analytics. DigitalGlobe is a trusted mission partner to the U.S. Government and friendly foreign governments, serving customers in 90 countries around the globe and a diverse set of industry-leading commercial customers that rely on the highest quality imagery and advanced geospatial expertise to make decisions with confidence. The company is engaged in extending its industry lead through its investment in its next generation constellation, WorldView-Legion, and its partnership with KACST and TAQNIA Space to build a fleet of small satellites, SCOUT, which will allow the company to image the most rapidly changing places on Earth up to 40 times per day.
STRATEGIC AND FINANCIAL BENEFITS OF THE COMBINATION
The combination of MDA and DigitalGlobes technology offer attractive vertical integration benefits, including lower costs, increased speed-to-market and enhanced analytics capabilities. Combining MDAs leadership in satellite design and manufacturing, radar capabilities, ground systems and systems engineering with DigitalGlobes world-leading constellation, archive, platform and advanced geospatial expertise and analytics will drive value and open channels for growth in adjacent markets. MDAs industry-leading technology in large and small satellites and ground stations will enhance DigitalGlobes future constellations, positioning the combined company to extend its lead in the collection, dissemination and analysis of commercial Earth imagery collected with unrivaled resolution, accuracy, revisit and refresh of the most rapidly changing places on the planet.
The transaction is expected to be accretive to MDAs Operating EPS in 2018 and the combined company will deliver meaningful revenue and cost synergies of C$75-150 million on a run-rate basis by 2019. Revenue synergies include accelerating SSLs penetration into U.S. Government markets, international market expansion, cross-selling opportunities and the ability to target larger geospatial services contract awards. Cost synergies include elimination of duplicative public company costs, procurement cost savings, efficiencies gained by leveraging SSLs manufacturing capabilities for future Earth observation satellite constellations, and the operational benefits of increased scale.
LEADERSHIP STRUCTURE
Mr. Lance, president and chief executive officer of MDA and president and chief executive officer of SSL MDA Holdings, will lead the combined company. Mr. Lances extensive experience in the global aerospace, defense and security markets will help guide and inform the transition and will position the combined company to capture growing demand for end-to-end space systems solutions.
