Canadian government blocks sale of MDA space division
For the first time in the 23-year history of the Investment Canada Act, the federal government blocked a foreign takeover because of a failure of the “net benefit” test; during this period, successive governments have approved 1,587 foreign takeovers; another 11,214 foreign acquisitions required notification under the Act, but not a formal review
Remember DPW? The UAE-based Dubai Ports World acquired, in late 2005, a London-based port operator which, among other things, ran the operations of about two dozen U.S. seaports. The idea that a United Arab Emirates company would run operations and security of major ports — and, hence, that its employees would have access to classified security arrangements in these ports — did not sit well with legislators and security experts: Many thought it was not such a good idea to have a Middle Eastern company run port operations in the United States at the very same time that the country was investing billions of dollars in an effort to prevent the smuggling into the United States of weapons of mass destruction in cargo containers. There was also a chorus of criticism of the Bush administration, with critics charging that the CFIUS (Committee on Foreign Investment in the United States) was tilted in favor of free trade rather than national security concerns. The result of the DPW firestorm was a tightening of the examination and approval process of foreign companies trying to buy U.S. critical infrastructure assets, and the introduction of various “mitigation” clauses which would allow a foreign company to acquire U.S. infrastructure assets, but would forbid its non-U.S. employees from having access to classified information (see, for the example, the case of French company Alactel’s merger with Lucent — and the mitigation clauses imposed on the new company, forbidding non-American employees from dealing with the Lucent-operated hush-hush Bell Labs in New Jersey, which does work for the U.S. intelligence community and military).
Worries about foreigners owning sensitive technology ar enot unique to the united States. Take Canada, for example, where, in an unprecedented move, the federal government has blocked the $1.3-billion sale of the space technology division of Vancouver-based MacDonald, Dettwiler, and Associates (MDA) to a U.S. firm. CBC news reports that in a letter last week to Alliant Techsystems Inc. (ATK), Industry Minister Jim Prentice said he is “not satisfied” the sale will be a net benefit for Canada. Alliant has been given thirty days to state its case to win approval for the sale. After question period in parliament Thursday, Prentice told reporters he was “very confident” of his decision. “It’s a very significant step under the Investment Canada regime of saying we don’t see net benefits to Canada in this transaction.” Neither of the companies involved in
