Intelsat announced today they intend to buy fellow satellite company PanAmSat in a deal valued at $3.2 billion, reports the Washington Post, Forbes and C/Net.
The deal would make Intelsat the world’s largest satellite carrier, ahead of SES Global, currently the world’s largest. A combined Intelsat/Panamsat would have 53 satellites with customers in over 220 countries and more than $1.9 billion in annual revenue say industry observers. Intelsat will either refinance or assume about $3.2 billion in PanAmSat debt. They hope to close the transaction within 12 months.
The two companies have complementary businesses. Intelsat (above) is strong outside the United States, while most of PanAmSat’s satellites hover over the Americas.
About half of PanAmSat’s revenue comes from cable companies, transmiting some 1,991 television channels worldwide through its fleet of 25 satellites. Intelsat, once a consortium of international carriers, is stronger internationally and has large contracts with governments and international carriers, major corporations and others.
Intelsat, a privately company held based in Bermuda, would acquire PanAmSat’s outstanding shares at $25 a share, a 26.3 percent premium over the current price. Wilton, Conn.-based PanAmSat became a publicly traded company in March after an initial public offering priced at $18 per share.
Earlier this month, Intelsat was rumored to be buying New Skies. The Wall Street Journal said Intelsat was in talks to buy New Skies for as much as $1.3 billion. New Skies was formed by a 1998 spinoff from Intelsat, when Intelsat was going private.
Intelsat would receive financing in the Panamsat deal from investment bankser led by Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Credit Suisse First Boston LLC and Lehman Brothers Inc. for the full purchase price. PanamSat is owned by Kohlberg Kravis Roberts, the Carlyle Group and Providence Equity Partners. They bought PanAmSat last year and own 58 percent of its shares. Of the remaining shares, 40 percent are traded publicly and management owns 2 percent.
Panamsat has a colorful and distinguished history. Rene Anselmo founded PanAmSat and placed his personal funds on the line to launch the world’s first privately owned international satellite, breaking the Intelsat monopoly. Reed Hundt called him the “Indiana Jones of Telecommuncations”.
Investment bankers now own most major satellite companies which has been rife with merger activity over the past three years. The development of transoceanic fiber optics and costly satellite failures (with associate high insurance rates) sent satellite stocks plummeting and many into backruptcy or mergers. Recently, improved demand for high-definition television, cable, broadband internet and the war in Iraq have helped their bottom line.
Today, some 200 geostationary satellites are in service. And there’s a new sheriff in town with the takeover of Intelsat, PanAmSat, Eutelsat and New Skies — the biggest satellite operators in the world — by private equity bean counters.
- European-based SES GLOBAL is the largest satellite company, operating a fleet of some 35 satellites. It rests on a more traditional shareholder base, which includes GE Capital, international financial institutions, and communications groups. It was born out of the combination of ASTRA, Europe’s leading provider of satellite capacity for direct-to-home reception, and US-based AMERICOM. Their network holds interests in; AsiaSat, Nordic Satellite AB, Nahuelsat, Star One, SATLYNX and WORLDSAT. The largest supplier of satellite services in the U.S., SES AMERICOM currently operates a fleet of 16 spacecraft in orbital positions predominantly providing service throughout the Americas. They also run AMERICOM Government Services to provide services for the military.
- Intelsat, the second-largest global satellite operator, is headquartered in Washington, D.C. and has 28 satellites in orbit and leases capacity on two others. Intelsat did a $3 billion deal with Apax Partners and Zeus Holdings Limited. Lockheed Martin owns a 24 percent stake in Intelsat, which is incorporated in Bermuda. Intelsat delayed the launch of its Intelsat Americas-8 satellite after a recent failure.
- PanAmSat, the third largest operator with a fleet of 25 satellites, sold out to affiliates of Kohlberg Kravis Roberts & Co., L.P., The Carlyle Group and Providence Equity Partners, for approximately $2.6 billion. KKR now has 43.5 percent stake while Carlyle and Providence each hold 26.9 percent stake. PanAmSat owns and operates satellites worldwide as well as the AMC-16, a hybrid Ku- and Ka-band satellite will be ready for high-speed data and digital video services throughout the U.S.. Their Americom 2Home customer, EchoStar Dish Network, may market it.
- New Skies Satellites NV was acquired by The Blackstone Group, a private investment and advisory firm, for $956 million in cash. The Dutch satellite company, New Skies Satellites NV, one of only four fixed satellite communications companies with global coverage, has five satellites in orbit and ground facilities around the world.
- British Telecom, the UK s largest telecom company, sold its 15.8 percent stake in Eutelsat, to a Goldman Sachs Group for $690 million in cash. Eutelsat has capacity on some 24 satellites that provide coverage from North and South America to Far East Asia.
- Rupert Murdock, with a studio and a network, is not a satellite operator but a major user of their services. He picked up controlling interest in DirecTV for $6.6 billion. Murdock’s reach is breathtaking. His pay satellites include BSkyB (United Kingdom and Ireland), Fox Sports (Australia), Foxtel (Australia), Sky PerfecTV (Japan), Star (Asia), and Stream (Italy). Murdock plays to win and HDTV may be the new battleground. Two-way satellite access, the only real option for many islanders, is getting pushed aside.
Other significant players include JSAT in Japan, which operates close to ten satellites over Asia including Horizons 1 (and soon Horizons 2), over the United States, MB Sat, a direct to cell monster operated by a consortium of Asian investors, Telesat Canada, which pioneered domestic satellite communications and operates the spotbeam platform used by broadband provider WildBlue, Shin Satellite, an Asian operator which just launched , IPSat a huge spot beam satellite, and Arabsat which provides service over Saudi Arabia including the highly successful Thuraya satphone service. By contrast, satphone providers Iridium and Globstar have had less than stellar success.
Inmarsat began in 1979 to provide global maritime communications. Their new Inmarsat I-4 satellites will form the backbone of Inmarsat’s planned Broadband Global Area Network (BGAN) services, offering phone and mobile data communications at up to 492kbps. The first of three Inmarsat-4 satellites is now in commercial operation in the Indian Ocean Region.
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