Loral Space & Communications has agreed to sell its satellite manufacturing subsidiary, Space Systems/Loral (SS/L) to Canadian communications rival MacDonald, Dettwiler and Associates (MDA) for about $875 million.

The deal is set to enhance Macdonald Dettwiler’s position in the communications arena and creates potential for increased business with both commercial and government clients.

“Both Space Systems/Loral and MDA are already important suppliers to the worldwide satellite industry,” John Celli, president of Space Systems/Loral, said in a prepared statement. “The combination is a very good strategic fit for both companies.”

MDA said the acquisition, which will immediately boost its earnings, will make it a major player in commercial communications and provide it with critical mass in the U.S. market.

“This is a game-changing transaction for our company,” claimed Daniel Friedmann, MDA’s chief executive, in another statement. “Post-acquisition, more than two-thirds of MDA’s total revenues will come from the commercial market.”

California-based SS/L has developed satellites that are used for television broadcasting, direct-to-home television services, broadband communications, military communications, wireless telephony, digital satellite radio, weather monitoring and air traffic management.

Following the acquisition, MDA expects to have combined annual revenues of close to $2 billion, and a combined order backlog of $2.8 billion.

“Space Systems/Loral’s business is fundamentally driven by the worldwide demand for television, digital audio, broadband Internet, mobile communications and voice telephony,” said Friedmann. “By acquiring one of the major companies that enable these essential communications services, MDA will move immediately to the forefront of this growing business.”

MDA plans to finance the transaction with cash on hand, a three-year note payable for $101 million, and about $500 million of borrowings under a new $1.1 billion fully committed credit facility from RBC Capital Markets.