By Calvin Biesecker

Alliant Techsystems [ATK] yesterday said it has agreed to acquire the space and related information systems business of Canada’s MacDonald Dettwiler and Associates (MDA) in a $1.3 billion cash deal that will make ATK a full-spectrum space company and double its international presence.

ATK has arranged financing for the acquisition, its largest ever, which it expects to close early in the second quarter of this year. The deal is subject to approval by regulators in the United States and Canada, and MDA shareholders.

In anticipation of closing the acquisition, beginning April 1 ATK plans to establish ATK Space Systems as its fourth business group. The new group president will be Carl Marchetto, who previously led Orbital Sciences Corp.‘s [OSC] Space Systems Group. In addition to the MDA business, the ATK Space Systems will include the satellite components and manufacturing, composites and materials and related technical services currently residing in its Mission Systems group.

MDA’s Information Systems and Geospatial business will bring to ATK capabilities in space robotics, satellite radar manufacturing, satellite to ground data transfer, the world’s largest global network of non-classified, commercial imaging satellite ground stations, and data processing to distribute solutions to a range of commercial, government and military customers. Combined with ATK’s existing and planned space launch capabilities, small satellite manufacturing, and advanced materials and engineering services, ATK is setting itself up as a total provider of space related services and solutions.

MDA makes the robotic arms for NASA’s Space Shuttle and the International Space Station. The company also makes Canada’s Radarsat satellites, which conduct marine surveillance, ice monitoring, environmental monitoring, disaster management and mapping in Canada and globally.

In addition to the space business, the Information Systems and Geospatial division also has a robust C4ISR business with over $80 million in annual sales. MDA does the missionization for Canada’s CP-140 maritime patrol aircraft, provides command and control simulation and training for Canadian naval frigates, and is competing for the Canadian Frigate modernization award this year. ATK currently performs aircraft missionization work for U.S. government customers.

There’s no overlap between ATK’s and MDA’s space and defense businesses, Dan Murphy, ATK’s chairman and CEO, told Defense Daily yesterday.

ATK says that MDA’s space and defense business will have about $500 million in sales during its 2009 fiscal year that begins on April 1, giving ATK Space Systems $900 million in sales overall. ATK said the deal will accelerate its organic growth rate to the high end of its 8 to 10 percent annual goal. Combined with its Launch Systems business, ATK will be the fifth largest space business in North America.

MDA’s Information Systems and Geospatial business has 1,900 employees, about 800 of whom are engineers, and operating margins exceeding 20 percent. ATK said the deal will be neutral to earnings in its FY ’09 and accretive thereafter. The Information Systems and Geospatial business has operating margins exceeding 20 percent and has 1,900 employees, about 800 of whom are engineers.

Murphy doesn’t expect any impediment to the sale from regulators due to the lack of product and service overlap and because MDA’s space business was purchased in the 1990s by Orbital Sciences, which eventually sold it back to Canadian investors in 2001 to raise capital.

MDA’s space and defense business was put up for sale last April but later was taken off the market. Then about six weeks ago ATK was notified that the business was for sale again. Murphy said ATK prevailed against one other “serious competitor” for the MDA business. MDA’s financial adviser is Bank of America and ATK’s is Goldman Sachs.

The acquisition is consistent with ATK’s strategic near-term goals. One is to create a fourth business group and another is a significant expansion of its international business. About 30 percent of the Information Systems and Geospatial group’s sales are in the United States, with Canada accounting for over 40 percent and other international customers the remainder.

ATK believes it will be able to accelerate MDA’s sales to U.S. customers, particularly in the classified arena, which U.S. import restrictions currently prevent, Murphy said. He also thinks that ATK will be able to “drive” MDA’s Radarsat satellite imagery into the U.S. market. Murphy also said that MDA can open doors for it internationally.

“The door opens both ways,” Murphy said.

In addition to Marchetto, who once led Eastman Kodak‘s [EK] satellite business before it was sold to ITT Corp. [ITT], ATK Space Systems will be supported by Mike Cerneck and Mag Iskander. Cerneck was the CEO of small satellite manufacturer Swales Aerospace, which ATK acquired last summer, and Iskander leads MDA’s space business.

Murphy said this leadership team gives him confidence that ATK will be able to successfully integrate the MDA business.