Canadian consortium acquires OSI Maritime Systems, preserving domestic naval tech

BURNABY · A consortium of largely Canadian investors has acquired OSI Maritime Systems, a British Columbia-based naval navigation technology company. The purchase keeps the nearly 50-year-old firm under domestic control following several recent foreign acquisitions in Canada's defence sector. The buying group is led by Montreal private equity firm Novacap and includes Crown corporations Export Development Canada and the Business Development Bank of Canada. The consortium is entirely Canadian except for one Scandinavian investor, and the financial terms were not disclosed.

OSI, founded in 1979, develops electronic chart software and navigation systems for ships and submarines. The company serves 27 NATO and allied navies, including the Royal Canadian Navy. Its technology has been installed or contracted on more than 1,000 vessels, according to the company. David Armstrong, a senior partner at Novacap, said his firm began speaking with OSI more than a year ago. "This was a company that ticked all the boxes for us," Armstrong said in an interview.

Armstrong said Novacap plans to invest to grow the business internationally and develop new products. "We think they're really fundamental to autonomous operations," he said. The acquisition is the first investment from Novacap's US$3.8-billion technology fund, which closed in February. At that time, Novacap CEO Pascal Tremblay told The Globe and Mail that Canada's growing defence spending presented a major opportunity for the fund.

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That opportunity has also drawn foreign investors, especially in underwater technology where Canada's long coastlines provide an advantage. On Oct. 20, Israeli defence company Elbit Systems Ltd. bought Port Coquitlam, B.C.-based International Submarine Engineering Ltd., which specializes in underwater vehicles. Days later, U.S. defence giant Lockheed Martin Corp. acquired Nova Scotia-based anti-submarine warfare company Ultra Maritime for $3.45-billion. In a written statement, OSI president and CEO Jim Girard emphasized the long-term nature of the company's products. "When a navy chooses a navigation system, it is making a 30-year decision, so continuity and reliability matter more in our market than in almost any other segment of systems and software," Girard said. This summer, OSI completed compliance testing against NATO's latest standard for electronic chart systems in warships.

The company is now developing an autonomy centre of excellence to support its work with the Royal Canadian Navy. In June, OSI signed a memorandum of understanding with German submarine builder TKMS, which is negotiating a contract with the Canadian government for up to 12 vessels. Armstrong said OSI's relationship with TKMS remains strong. He described OSI as an ideal investment target for Novacap. "This is exactly the type of company that we look for in the mid-market to invest behind and grow," Armstrong said.

With files from The Globe and Mail