MAXR Stock Pops on $1 Billion MDA Sale to Northern Private Capital

MAXR Stock

MAXR stock is trading up today after Maxar Technologies (TSX:MAXR) (NYSE:MAXR) announced that it had agreed to the sale of its MDA division for $1 billion CAD.

MAXR Stock Gains 20%

The space technology and infrastructure firm announced on December 30 that it had agreed the sale of its MDA division, best known for its series of Radarsat satellites built for the Canadian government as well as designing robotic arms for the shuttle and International Space Station. MDA will be purchased by a consortium of investors led by Northern Private Capital (NPC) and will now become a standalone company. MAXR stock is up over 20% since the deal was announced.

Debt Relief

The sale of Maxar’s Canadian division is welcome news for investors who were concerned by the heavily indebted position of the company, which stood at $3.1 billion USD as of September. The MDA sale is not the first such asset offloading the company has engaged in recently, after selling $291 million USD of real estate in Silicon Valley that previously belonged to satellite manufacturer SSL. MAXR stock is currently trading for $17.33 following news of the deal.

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Maxar Technologies had been weighing up a deal for MDA for some time now after it was reported in July that Italian aerospace firm Leonardo SpA and Thales SA, a French company, were considering a joint move for the Canadian-based division.

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“This transaction, when combined with the recently completed sale of real estate in Palo Alto, reduces Maxar’s overall debt by more than $1 billion and significantly reduces Maxar’s leverage ratio,” said Biggs Porter, Chief Financial Officer of Maxar, in a statement. “We expect the net effect of all these factors to only reduce our prior guidance for Adjusted EBITDA and free cash flow generation in the 2022 to 2023 time period by approximately $50 million.” Despite Maxar’s debt burden, MAXR stock has gained over 250% in just under 12 months.

MDA was founded in British Columbia in 1969 as MacDonald, Dettwiler and Associates, and after establishing itself as a leading space infrastructure company, set about expanding into the sizeable US government market. A 2012 acquisition of SSL and a merger with DigitalGlobe in 2017 created the US-based business known as Maxar Technologies. MAXR stock debuted on the New York Stock Exchange in October 2017 at a price of $55, which is nearly 70% off its current price, as its outstanding debt burden weighed on investor optimism.

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