The Department of National Defence in Ottawa in 2022.Spencer Colby/The Globe and Mail
A U.S. defence company is looking to raise as much as $100-million to build a manufacturing facility in Ontario focusing mainly on small arms that would supply the Canadian military and expand the domestic production of weaponry.
LeafStar Holdings LLC told the provincial government this week in meetings that it’s seeking to build a factory in Southern Ontario that would make small arms and light weapons that can be used by military forces and private security contractors, according to two sources with knowledge of the discussions.
LeafStar, a Virginia-based private equity company operating in the defence sector, already operates a small-arms plant in Sweden that has secured contracts with larger defence companies to manufacture weapons for the Swedish military. The project in Ontario would be based on a similar business model and could create up to 300 jobs, ranging from engineers to metallurgists to quality control personnel, according to the sources. The Globe and Mail is not naming the sources because they were not authorized to speak publicly about the venture.
The company intends to raise between $70-million and $100-million from investors – mainly European and Canadian – to break ground on the project, the sources said. One of LeafStar’s primary investors is an Ottawa private equity firm, Ethical Capital Partners, best known for its acquisition of the parent company of Pornhub in 2023.
LeafStar aims to set up a Canadian subsidiary in Ontario that would run the plant.
The defence company became interested in expanding to Ontario after Prime Minister Mark Carney announced a commitment to invest $180-billion in defence procurement over the next decade.
The federal government’s first-ever Defence Industrial Strategy, announced this past February, prioritizes boosting sovereign capabilities and directing military arms contracts to Canadian companies first. Ammunition, including small arms, is one of the 10 sovereign capabilities identified by Ottawa in its strategy as a supply chain it would like to build and control in Canada.
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According to sources, representatives from LeafStar, including its chief executive officer Bryan Cardwell, met with representatives from Ontario Premier Doug Ford’s office on Tuesday to discuss the venture. Bernard Derible, Ontario’s first military defence representative, was part of the talks. His role was created this year to promote Ontario as a manufacturing hub for defence companies.
LeafStar and their investors also met with representatives from Invest Ontario this week, to get advice from the agency as to where the most suitable locations to set up a factory would be, the sources said. LeafStar intends to acquire an existing manufacturing facility and retrofit it to make small arms like pistols, revolvers and weapons parts as the company does in Sweden. If LeafStar finds a suitable location, secures contracts with customers and raises sufficient capital, it could begin operations within a year, the sources said.
In a statement, a spokesperson from the Premier’s office confirmed that the meeting took place and said that the government is ready to land a large share of defence investment in Ontario.
“We have the critical minerals, a highly skilled work force and the defence and security expertise businesses need to succeed, and we will continue to use these tools to attract new investments to position Ontario as a global defence hub,” the statement read.
Fady Mansour, a shareholder of LeafStar Holdings and managing partner at Ethical Capital Partners, also confirmed the meetings took place. When asked about how close LeafStar was to raising the capital it needed for the venture, Mr. Mansour declined to elaborate.
Currently, Canada’s procurement of small arms and ammunition is governed by its Munitions Supply Program, which was created in the 1970s and protects producers from competition. There are five suppliers in the program, including Colt Canada in Kitchener, Ont., and General Dynamics Ordnance and Tactical Systems – Canada in Repentigny, Que., a subsidiary of the U.S. defence company. Both companies were recently awarded contracts by Ottawa to make rifles and ammunition for the Canadian Armed Forces.
After backlash from industry for the Department of Defence’s decision to award an ammunition contract to a U.S. subsidiary, Secretary of State for Defence Procurement Stephen Fuhr acknowledged in an interview with The Globe that the Munitions Supply Program was ripe for revision. He said more vendors, as well as foreign direct investment to bolster Canadian supply chains, would be welcome to expand Canada’s munitions capability.
“This isn’t so much about a Canadian company, per se, as Canadian economic value or Canadian economic benefit. It could come in either of those forms,” he said in an interview in March.
According to the federal government’s recently released Buy Canadian Policy, a Canadian supplier must be registered and file taxes in Canada, maintain a registered address and employees in Canada and not subcontract work to non-Canadian suppliers in a way that doesn’t result in any industrial benefits for Canada.
Federal lobbying registry records show that a lobbyist from Ethical Capital Partners also met with federal government officials to discuss how the company could support the “Buy Canadian” defence procurement plan. Specifically, the lobbyist met with representatives from Public Services and Procurement Canada and the Department of National Defence multiple times in late February and early March.
Laurent Blanchard, interim press secretary in Mr. Fuhr’s office, said in an e-mail that Mr. Fuhr’s former chief of staff, Mary-Rose Brown, met with LeafStar on March 2 “to answer questions about the Defence Industrial Strategy and help them better understand Canada’s build-partner-buy framework.”
He added: “We regularly meet with companies who reach out for meetings, not because we are about to enter into contractual agreements, but because we want to help put Canadian companies in the best possible position to succeed and grow in this sector.”
Lieutenant Pamela Hogan, a spokesperson for the Department of Defence, said in an e-mailed statement that the government department was not aware of any meetings between DND or Canadian Armed Forces personnel and LeafStar representatives.
At Colt Canada, the company is investing more into its own long-term manufacturing capacity to fulfill domestic demand as well as orders from NATO allies. The company was recently awarded a contract from the federal government under the Canadian Modular Assault Rifle program, and plans to buy new manufacturing equipment and invest in a facility expansion.
Colt isn’t the only company in Canada to begin investing in new domestic manufacturing facilities and upping the share of Canadian content in its goods in anticipation of Ottawa’s defence dollars beginning to flow. However, while the signals are all there, many industry members say they’re yet to see the contracts being talked about – at the speed the government is promising – come through.