The Canadian government on Friday rejected Alliant Techsystems‘ [ATK] proposed acquisition of MacDonald, Dettwiler and Associates‘ (MDA) space business saying the deal demonstrated no net benefit to Canada.

“I have confirmed my initial decision that I am not satisfied that ATK’s proposed acquisition of the Information Systems Business of MDA would likely be of net benefit to Canada,” Jim Prentice, Canada’s Minister of Industry, said in a statement. “Foreign investment plays an important role in the Canadian economy. Foreign investors bring with them capital, knowledge, capabilities and technology that can increase the productivity, efficiency and competitiveness of Canadian firms. However, where a significant transaction does not demonstrate net benefit to Canada, it cannot be approved under the Investment Canada Act.”

The rejection marks the first time in nearly 20 years that Canada has blocked an acquisition by a foreign company under the Investment Canada Act.

While Prentice’s statement left out any detail on the rationale for blocking the sale, ATK, citing Canadian regulators, said the government’s objection centered around “potential extraterritorial application of U.S. export law.” Essentially, the Canadians were concerned that any technology developed by MDA as an entity of a U.S.-based company would fall under U.S. export restrictions.

Interestingly enough, MDA at one time was owned by the U.S. space firm Orbital Sciences Corp. [ORB], which acquired the Canadian firm in 1995 and then sold it to Canadian investors in 2001 to pay down debt.

Prentice’s decision wasn’t a surprise. Early last month he informed ATK that he did not see the deal as having a benefit to Canada (Defense Daily, April 11).

ATK said that it will continue its disciplined strategy of capital deployment which includes strategic acquisitions, debt reduction and share repurchases.