Norsat sale to Hytera closes for CAD $85 million, despite controversies and contention

August 24, 2017

Amid significant controversy, the sale of Norsat International, a Vancouver-based satellite communications company, to Hytera Communications, a Chinese telecom company from Shenzhen, closed on July 20, 2017 for CAD $85.2 million, according to the China Institute at the University of Alberta (CIUA) Investment Tracker Database. However, just days before the deal closed, Hytera was expelled from a mobile-technology trade associate run by the Chinese Ministry of Public Security. The expulsion was apparently due to a bidding dispute for a domestic police communications contract.

At the end of June, Norsat shareholders turned down a competing bid from U.S. Pivot Fund Management in Atlanta in favour of a takeover by Hytera. The Liberal government has since approved the sale, but faced subsequent criticism from both opposing parties and news media outlets. In the past, Hytera has been accused of stealing patents from industry competitors such as Motorola, as well as undercutting Chinese competitors with exorbitantly low prices. Opposition Leader Andrew Sheer has repeatedly suggested that the sale of Norsat represents a national security risk to Canada and its allies, as well as an opportunity for China to benefit from access to Canadian communications technology patents: in a similar deal, CSIS blocked the sale of ITF Technologies, a Montreal-based tech firm, to a Chinese company on the grounds that the sale would provide Chinese firms with access to sensitive military technology. Many have suggested that the sale of Norsat, which provides satellite communications technology to the Canadian armed forces, as well as to NATO allies, would provide China with a military advantage.

Norsat’s current customers include the U.S. Department of Defence, the U.S. Marine Corps and Army, NATO, the Irish Department of Defence, the Taiwanese army, and several major media companies. The Pentagon has begun an in-depth review of its current contracts with Norsat to determine if the sale represents a national security threat to the United States. In a June 27 press brief, Lt.-Col. Roger Cabiness of the U.S. Department of Defence stated that "current contracts already awarded will be reviewed on a case-by-case basis and appropriate measures will be taken, in accordance with the terms of those contracts and consistent with U.S. laws and department regulations and policies". Prime Minister Trudeau publically stated that a routine review of the sale was conducted and the results of which revealed no threats to national or international security. He further stated that Washington was informed of the Norsat sale prior to its government approval. The Department of Defence has not yet commented whether Ottawa informed Washington of the deal prior to its approval. Excluding the sale of Reliance Home to CKI, the Norsat sale was the largest instance of Chinese investment in Canada since March, and accounted for 25% of Chinese investment in Canada in July.