MDA, DigitalGlobe Merger Prompts Johnson & Weaver Investigation

MDA offices

MDA offices. Photo: MDA

MacDonald, Dettwiler and Associates (MDA) and DigitalGlobe announced they have entered into a definitive merger agreement, pursuant to which MDA will acquire DigitalGlobe for $35 per share in a combination of cash and stock. The transaction values DigitalGlobe at an equity value of approximately CA$3.1 billion ($2.4 billion), and an enterprise value of CA$4.7 billion ($3.6 billion), including assumption of DigitalGlobe’s CA$1.6 billion ($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.

Together, the companies will leverage a suite of space-related capabilities, including communications and Earth Observation (EO) satellites and robotics, ground stations, integrated electro-optical and radar imagery, and advanced data analytics. Additionally, the combined company will pursue cloud-based information services.

The two companies claim their combined technology offers attractive vertical integration benefits, including lower costs, increased speed-to-market and enhanced analytics capabilities. Howard Lance, president and chief executive officer of MDA and president and chief executive officer of Space Systems Loral (SSL) MDA Holdings, will lead the combined company.

However, shareholder rights law firm Johnson & Weaver has launched an investigation into whether the board members of DigitalGlobe breached their fiduciary duties in connection with the proposed sale of the company to MDA.

DigitalGlobe HQ 2015

DigitalGlobe’s headquarters set for 2015 in Westminster, Colo. Photo: Griffin Capital

The investigation concerns whether the DigitalGlobe board failed to satisfy their duties to the company shareholders, including whether the board adequately pursued alternatives to the acquisition and whether the board obtained the best price possible for DigitalGlobe shares of common stock. Johnson & Weaver is investigating whether the proposed deal price represents adequate consideration, especially given that the price target for one Wall Street analyst is $44 per share.

In its most recent earnings report released Feb. 24, DigitalGlobe reported full year net income growth of 13.7 percent to $26.5 million, or $0.34 per diluted share. The company also reported adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) growth of 7.6 percent to $382.7 million.

For the fourth quarter, total revenue grew 6.1 percent due to the addition of The Radiant Group, while total net income loss decreased to $9.3 million, or a loss of $0.17 per diluted share.

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