Louis Vachon, speaking as chairman of BCE at the company's annual meeting in Montreal this month, will be chairman of Marconi Technologies.Christopher Katsarov/The Canadian Press
Quebec banker and private equity executive Louis Vachon is joining senior managers with U.K. military equipment supplier Cobham Ultra to buy its tactical communications business, forging a new Canadian defence company under the name Marconi Technologies.
The investor group is acquiring the business, part of the Ultra I&C unit, from U.S. private equity firm Advent International, according to the buyers. The plan is to cut it loose from its corporate parent, bring it under Canadian ownership, and build out an independent military equipment supplier with a name that has deep ties to the country. The purchase price was not disclosed.
Mr. Vachon will be chairman of the company, which will have an operational and decision-making centre located in Montreal. Alain Cohen, a former associate partner at McKinsey & Co., is leading the business as chief executive while Faith Rhodes, who previously worked at EY-Parthenon and CAE, is chief operating officer and Canadian market president.
Both Ms. Rhodes and Mr. Cohen are veterans of the Canadian Armed Forces. Mr. Vachon, who joined J.C. Flowers & Co. after leading National Bank as CEO for 14 years, is an honorary lieutenant-colonel of the Fusiliers Mont-Royal, a primary reserve infantry regiment of the Canadian Army.
“Some of the emotional aspect of it for me was the fact that, in my humble view, for too long a disproportionate percentage of the defence contracts in this country went to non-Canadian firms,” Mr. Vachon said in an interview ahead of a formal announcement scheduled for Tuesday. That needs to change, he said. “That’s why I’m getting involved.”
The transaction runs counter to merger and acquisition deals that have seen international players gobble up Canadian industrial companies, including Platinum Equity’s $1.35-billion purchase of aircraft landing gear maker Héroux-Devtek last year. It also comes on the heels of another sale involving Cobham Ultra, in which it unloaded its cybersecurity business to European aerospace and defence giant Airbus in March.
Former National Bank CEO Louis Vachon joins New York-based private investment firm
Marconi Technologies employs 300 people and is already a supplier to NATO and allied forces, with operations in Canada, the United States, the U.K. and other markets. It has three main products: Archer, a tropospheric scatter communications system with a 200-kilometre range designed for expeditionary forces; Hunter, a line of satellite-based communications terminals; and Orion, a suite of line-of-sight tactical radios.
Shifting to a standalone business operating under its own steam will open up new opportunities for growth, Ms. Rhodes said. The company, which sells a major portion of its output into the U.S., intends to push harder into other markets, she said.
“Exports have been very important from a revenue standpoint for us,” Ms. Rhodes said. “Coming under Canadian ownership, that allows us to increase our presence within Canada and also helps from a European standpoint as well, to diversify in the marketplace.”
The existing Ultra I&C tactical communications business traces its lineage back to the Canadian Marconi Corporation, Ms. Rhodes said. Guglielmo Marconi was an Italian physicist and inventor whose work is widely credited as laying the foundation for the development of radio and modern wireless communications systems.
The inventor’s connection to Canada began in 1901, when he set up a transmitter in England and a receiver at Signal Hill in St. John’s, Newfoundland, to demonstrate that wireless telegraphy over long distances was possible. News of this success quickly spread and Wilfrid Laurier, prime minister at the time, offered the Italian a grant to build his first permanent wireless station in the country, according to Parks Canada.
Marconi Technologies is fully financed at the moment by private investors. But it’s had “very good, proactive” talks with the Business Development Bank of Canada and the Caisse de dépôt et placement du Québec about next steps, Mr. Vachon said. That could include backing for acquisitions or major capital expenditures, he said.
“Going independent, I think, is going to help us culturally, technologically to present ourselves as a Canadian defence tech, and eventually a defence tech prime,” Mr. Vachon said, referring to corporations that have direct contracts with governments for large-scale military programs.
“That’s where we want to be. And being a little bit more aggressive, a little bit more entrepreneurial, completely independent. I think it’s culturally and strategically an advantage in this environment.”