Selling its U.S. commercial IT business will allow Calian Group to focus on opportunities in growing areas such as defence and space, the firm’s CEO says. Calian announced Wednesday it has signed a deal to sell its U.S. commercial IT business based in Houston to Trace3, a California-based technology consultancy. Under the deal, Trace3 will […]
Selling its U.S. commercial IT business will allow Calian Group to focus on opportunities in growing areas such as defence and space, the firm’s CEO says.
Calian announced Wednesday it has signed a deal to sell its U.S. commercial IT business based in Houston to Trace3, a California-based technology consultancy. Under the deal, Trace3 will pay about $43 million in cash and assume liabilities totalling about $17 million.
Calian chief executive Patrick Houston said Thursday the Kanata-based company has been reviewing its product portfolio for the past year and the sale “is kind of the culmination of that whole exercise.”
Houston stressed the business is a money-maker, estimating it has generated about $30 million in net profits since Calian entered the U.S. commercial IT market with its $38-million acquisition of Houston-based Computex in early 2022.
“From a return perspective, I think it was a success,” he said in an interview with OBJ.
But Houston suggested he and the company’s senior leaders see more upside in other growing business lines such as military training software, satellite components and other products and services that cater to the defence and space industries.
“I think it allows us to just focus on all the other places where we’re seeing a ton of momentum — in defence, space,” he said of the decision to offload the IT business, which had nearly 100 employees and generated about $80 million in annual revenues, or almost 10 per cent of Calian’s total sales.
“I think there's value in being simpler and more focused. I think this helps us get there.”
Calian’s acquisition of Computex four-and-a-half years ago was its first M&A deal in the U.S. Houston said the transaction helped Calian become less “Canadian-focused,” noting the company has acquired another U.S. firm as well as four companies in Europe since then.
After being a keen buyer of companies over the past decade, Calian has flipped the script this time around. But Houston suggested it won’t be a regular occurrence.
“Certainly we’re more in build mode than portfolio-trimming mode,” he said. “But at the same time, we have grown pretty significantly. Every once in a while, you need to look and say, ‘Could you trim and refocus and get more momentum going in one direction?’ I think that’s what this exercise was. I don’t think you're going to see a lot of this from us. This was more of an aberration.”
'Not exiting the U.S. market'
The sale comes amid an escalating trade war between Canada and the U.S., with both countries recently announcing new rounds of tariffs.
However, Houston stressed that Calian “was not exiting the U.S. market,” but instead is “refocusing” on building its customer base in other industries south of the border, such as space and defence.
“Despite all the tariffs, despite all this other stuff, I think longer-term — if you think 10 to 15 years out — the U.S. market is still important for us,” he added. “Certainly, in order for us to be a player in space, we’re going to have to continue to operate in the U.S. market.”
Calian’s space and defence revenues rose 20 per cent in the third quarter compared with the previous year as the federal government ramps up military spending in a push to reduce its dependence on American suppliers.
Houston said Calian is eyeing a number of potential acquisitions aimed at complementing its existing offerings in defence and space, such as military training software, and expanding its defence customer footprint in Europe.
“We’ve always got a couple of things going,” he said. “That’s really the only way you can consistently do (acquisitions) is if you’re just constantly putting time and attention on it. If anything, we’re trying to speed up (rather) than slow down, but at the same time stay disciplined and buy strategic assets.”
Houston also wants to boost Calian’s growing satellite business. While the company is best-known for building satellite equipment such as antennas, he said Calian’s recent acquisition of Mississauga-based Galaxy Broadband Communications is a step in a new direction.
Founded more than 30 years ago, Galaxy operates low-Earth-orbit satellite, microwave and fibre communications infrastructure. The company delivers internet and voice communications services as well as IT management, cybersecurity and other services to federal, provincial and municipal governments, the Canadian Armed Forces, Indigenous communities, mining companies and other customers.
Houston said Calian will likely ink more deals to expand its satellite service delivery business.
“It’s just better recurring revenue over the long term,” he explained.
After rising five per cent to more than $81 Wednesday morning, Calian shares fell to $74 Thursday morning before rallying to about $75.50 in late-afternoon trading on the Toronto Stock Exchange.
— With files from The Canadian Press
