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Industry Minister Jim Prentice is defending his decision to block the sale of Canada's largest space technology firm to an American arms maker, saying the proposed deal wouldn't provide net benefits to Canada.

Prentice has sent a formal rejection letter to Alliant Techsystems Inc. (ATK), a U.S. company that has been trying to purchase a division of  MacDonald, Dettwiler and Associates, the Canadian firm responsible for the Radarsat 2 satellite, Canadarm, and the space robot Dextre.

Prentice said he told ATK the sale will not be allowed unless the company can offer new and compelling information.

"At this point I've made it very clear to ATK the transaction as proposed doesn't meet the net benefits test and it's certainly up to them to sit down with our officials and put for any proposals that they think are worthy," Prentice told reporters on Thursday.

ATK has 30 days following Prentice's preliminary decision to adjust their proposal.

Prentice said he looked at the case carefully before tentatively rejecting the deal.

"A lot of due diligence has been done," Prentice told CTV's Mike Duffy Live on Thursday. "A lot of work has been put into it and it's important that we welcome foreign investment to Canada, so a decision like this is a unique case that has to be dealt with carefully."

Alliant had offered US$1.325-billion for the purchase of the Vancouver-based MDA.

But the deal faced opposition from politicians, scientists, some MDA staff, and labour groups. Critics claimed Canada, which subsidized some of the company's projects, could lose access to its own technology and images for the Radarsat 2 satellite images in the future if the technology ended up under U.S. control.

Prentice told reporters he made his decision based on Section 20 of the Investment Canada Act, which requires the minister to review such transactions and ensure that Canada's best interests will be met.

While the Tories said the notice does not kill the sale to the American arms-maker, CTV parliamentary correspondent Roger Smith said judging from the strong language used by Prentice and the prime minister in the House of Commons, "it sounds like the deal is all but dead."

"(Prentice) is right out in front, saying the deal doesn't amount to a 'net benefit' to Canada," said Smith.

"It would be amazing for them to back down after that."

Smith added, however, the government is being careful to point out that this is not a sign that Canada is becoming protectionist, in case other American companies interpret this move as Canada being closed for business.

Support for the decision

The former head of the Canadian Space Agency, Marc Garneau, told CTV's Canada AM on Thursday that the government has made the "right decision in this case."

The former astronaut said Canadian taxpayers helped build MDA. He said the sale of some of its most prized technology would "mean that we would essentially be back at square one in terms of trying to rebuild the capability that took us decades to (develop)."

NDP industry critic Peggy Nash said it is the first time Canada has ever blocked the sale of a domestic firm to a foreign buyer -- and she agrees with the decision.

"We believe the minister has made the right call here," she told Â鶹´«Ã½net.

Some proponents of the deal had said the sale of MDA to an American company would have saved jobs by allowing its current staff to work on new U.S. defence projects.

But critics pointed out that such contracts would be classified and could have meant that Canada would lose access to the results of years of research and funding.

U.S. opposition

On Thursday afternoon, former U.S. defence secretary William Cohen offered his opinion, siding with the U.S. company. Cohen, who served under president Bill Clinton from 1997 until 2001, said there are ways to address Canadian concerns. He also noted that some concerns were more emotional than substantive.

International trade lawyer John Boscariol told Mike Duffy Live that if Prentice permanently blocks the sale, legal experts will be poring over law books to determine whether his actions were legally justified.