Intelsat Ltd. agreed to buy PanAmSat Holding Corp. for $3.2 billion in cash to form the world's largest commercial satellite operator and gain television-broadcasting customers including CNN and MTV.
Intelsat, owned by four private equity firms including Apollo Management LP, will pay $25 a share for PanAmSat, the world's largest distributor of TV channels over satellite. That's 26 percent more than the closing price of $19.80 on Aug. 26 in New York Stock Exchange composite trading. Intelsat said in a statement yesterday that it also will assume $3.2 billion of PanAmSat's debt.
The purchase will create a company with more than $1.9 billion in sales and may help Pembroke, Bermuda-based Intelsat compete with SES Global SA, the current No. 1 satellite operator. The transaction spells a windfall for Kohlberg Kravis Roberts & Co., Carlyle Group and Providence Equity Partners, which quadrupled their investment.
"Intelsat can run their satellites more efficiently than before," said Thijs Berkelder, an Amsterdam-based analyst at Petercam, an independent Belgian brokerage.
Shares of PanAmSat surged $4, or 20 percent, to close at $23.80. The company sold shares at $18 each in a March initial public offering to become the first satellite company to trade on the New York exchange.
The buyout firms invested $548 million in equity last year when they bought PanAmSat. After the IPO, their stake dropped to 58 percent, which is now worth $1.9 billion. They also reaped dividends of about $446 million.
The value of mergers involving satellite telecommunications companies tripled last year to $13.9 billion, data compiled by Bloomberg show. Of the 270 commercial satellites circling around the globe, about 70 percent are owned by the biggest operators, Berkelder said.
Becoming bigger will help Intelsat save money as it competes with cable television and telephone companies that deliver TV and Internet service, New York-based Bear Stearns & Co. Inc. analyst Robert Peck said yesterday in a note to clients.
"They may be able to save some cash, they may be able to rationalize some assets," said Peter Jackson, chief executive of Hong Kong-based Asia Satellite Telecommunications Holdings Ltd.
Intelsat will increase the number of satellites it has to 53 from 28. The company currently ranks second among satellite operators and PanAmSat is third. SES Global operates 35 satellites.
Wilton, Conn.-based PanAmSat had sales of $827.1 million in 2004.
source: http://www.thejournalnews.com/apps/pbcs.dll/article?AID=/20050830/BUSINESS01/508300324/1066&template=printart 31aug2005
Closely held Intelsat Ltd., said it signed a definitive agreement to acquire PanAmSat Holding Corp. for $3.2 billion, bidding to create the world's largest commercial-satellite fleet with unparalleled influence over new offerings such as high-definition television and Internet access.
The deal will award PanAmSat shareholders with a price of $25 per share, or roughly a 26% premium to the company's close of $19.80 in New York Stock Exchange composite trading Friday. But if the proposal clears regulatory hurdles, the biggest winners would turn out to be the private-equity firms that purchased PanAmSat, Wilton, Conn., about a year ago. After a year of navigating the financial and management turmoil roiling the satellite-services sector, the buyout shops would end up walking away with $2.25 billion, or nearly four times their initial investment of $550 million.
With its global reach, 53-satellite fleet and ability to manage in-orbit satellites to cope with malfunctions and minimize outlays for additional launches, the merged company would have unparalleled influence over the satellite-communications sector. The nearest competitor would be SES Global SA of Luxembourg, which has been the industry leader and trendsetter in terms of major acquisitions and joint ventures.
Consolidation has been building among satellite operators for years, as they struggle amid weak demand to pare the costs of launching and operating spacecraft designed to beam television programs, voice traffic and all sorts of government and corporate data.
But even more powerful forces have prodded major shifts in strategy and management: Seeking to leverage the ability of satellite firms to generate cash, a long list of well-known private equity firms pumped about $9 billion into the sector in recent years. They also have taken advantage of generous capital markets to unveil a series of initial public offerings, special dividends and merger plans to notch significant profits.
Intelsat, which is based in Bermuda and has its headquarters in Washington D.C., had engaged in simultaneous talks to acquire a smaller rival, New Skies Satellites Holdings Ltd. of the Netherlands. But in the end, Intelsat's owners decided that the advantages of size and diversity offered the greatest opportunities to rev up what has been the company's plodding growth.
In fact, it was just about a year ago that three buyout firms -- Kohlberg Kravis Roberts & Co., Carlyle Group LLC and Providence Equity Partners Inc. -- closed on a deal to take PanAmSat private for $3.55 billion and the assumption of $750 million in debt. Then in March of this year, the group sold off 42% of the company to the public, and along the way, the private equity firms also took out $446 million in special dividends.
The proposed company will not trade on a public stock exchange, though that might change relatively soon according to industry officials. Intelsat had considered its own initial public offering long before it was taken over by private-equity interests, and the new company certainly would be more inviting to investors. An IPO is considered likely sometime over the next few years.
The private-equity firms revitalized the industry because they "brought in rationalization" and a more-disciplined management approach, said PanAmSat chief executive Joseph Wright, who is slated to become chairman of the combined company. David McGlade, currently chief executive of Intelsat, will continue as CEO.
The market implications are bound to be examined closely by the Federal Communications Commission and the government's antitrust authorities, though yesterday Intelsat officials expressed confidence the deal would be approved.
Credit Suisse First Boston advised Intelsat, with legal advice from three law firms: Wachtell, Lipton, Rosen & Katz; Paul, Weiss, Rifkind, Wharton & Garrison; and Milbank, Tweed, Hadley & McCloy LLP. Morgan Stanley advised PanAmSat, with legal counsel from Simpson Thacher & Bartlett.
Communications satellite operator Intelsat Ltd. has agreed to buy rival PanAmSat Holding Corp. (NYSE:PA - news) for $3.2 billion, creating the world's largest commercial satellite fleet, the companies said on Monday.
PanAmSat stock rose almost 22 percent after Intelsat said it would pay $25 a share, a roughly 25 percent premium over its Friday close and 40 percent higher than its March initial public offering price. Intelsat will also refinance or assume about $3.2 billion of debt of PanAmSat and its subsidiaries.
The deal will vault Intelsat ahead of SES Global, currently the No. 1 satellite operator, and help it save on expenses as it faces tough competition from other satellite players and terrestrial operators, which can offer similar services without the expense of launching into space.
The agreement comes just over a week after reports that Intelsat was in talks to buy smaller rival New Skies.
SG Cowen analyst Tom Watts said the deal leaves New Skies "without a date" in the latest round of consolidation in an industry that has been rife with deals in the last few years. New Skies shares fell more than 11 percent after the news.
The combined companies -- Intelsat is strong in data services while PanAmSat carries a lot of video -- would be in a better competitive position, with potential for savings and expansion into new markets, Watts said.
"It's a great deal," he said. "Both PanAmSat and Intelsat were struggling to reach SES's scope. It gives SES a real competitor."
Intelsat, which will keep its name, will have annual revenue of more than $1.9 billion and 53 satellites carrying television, telephone and data traffic for media, corporate and government clients in more than 220 countries.
Intelsat, which was bought by private equity consortium Zeus Holdings in January, could look for a public listing but Chief Executive, David McGlade, who will keep the title, said a listing would likely wait until after merger integration.
"I think we're a bit of a way out," he said in an interview. Intelsat expects operational savings from the deal and could potentially reduce the number of satellites it runs but McGlade was not ready to estimate specific figures.
The deal, which has been approved by both boards, also needs PanAmSat shareholder approval and clearances from regulatory agencies, including U.S. government antitrust authorities and the Federal Communications Commission. The executives said they do not expect to have to make any divestitures for regulators.
Watts believes regulators will approve the deal but said they may ask for the sale of North American satellites Intelsat bought from Loral Space & Communications Ltd. . These assets could be a good match for New Skies, he said.
PamAmSat CEO Joseph Wright, who will be chairman of the new Intelsat, said there will still be 37 satellite operators around the world and that Intelsat would keep looking at partnerships with players such as small national operators.
PanAmSat went public less than a year after it was bought by private firms which still own 58 percent of the company. Intelsat, which was set up as a multi-government organization in 1964 at the time of the Cold War, has attempted in vain to float at least three times over the last few years and failed to buy Paris-based operator Eutelsat in 2002.
McGlade said one priority would be to beef up Intelsat services in Europe, where SES and Eutelsat dominate. Intelsat also sees growth in regions such as Africa and Asia.
He expects the deal to give Intelsat a better chance in emerging areas such as Internet based video services which U.S. phone companies are planning to offer in the next few years.
Intelsat said it has financing commitments for the deal, which is expected to close in six to 12 months, from a group led by Deutsche Bank Securities, Citigroup Global Markets, Credit Suisse First Boston and Lehman Brothers.
Intelsat's financial advisor for the deal was Credit Suisse First Boston and its legal advises include Wachtell, Lipton, Rosen & Katz. PanAmSat's financial advisor was Morgan Stanley and its legal advisor was Simpson Thacher & Bartlett.
PanAmSat shares were up $3.97 at $23.77 in afternoon trade on the New York Stock Exchange. New Skies shares, which had been boosted on speculation it would be bought by Intelsat, were off $2.56 at $21.24 also on the NYSE.
source: http://news.yahoo.com/news?tmpl=story&u=/nm/20050829/bs_nm/telecoms_panamsat_dc_4 31aug2005
Intelsat is acquiring PanAmSat (Quote, Chart) for $3.2 billion in cash. If the deal receives regulatory approval, the combined companies will control a fleet of 53 satellites to deliver digital content and services such as broadband in more than 200 countries.
PanAmSat brings a video-centric customer base to deal, including leading providers of cable TV programming. Intelsat's traditional strength is in providing core telephony and advanced data services to developing and under served regions around the world.
The privately-held Intelsat distributes video, voice and data for television and content providers, government and military entities, major corporations, telecommunications carriers, and Internet service providers.
PanAmSat is the world leader in transmitting standard and high definition signals, providing satellite streaming to almost 2,000 television channels around the world. The company's fleet of 25 satellites is capable of reaching more than 98 percent of the world's population through cable television systems, broadcast affiliates, direct-to-home operators, Internet service providers and telecommunications companies.
PanAmSat also supports satellite-based business networks in the United States, as well as specialized communications services in remote areas throughout the world.
In addition to its core operations of transmitting corporate data and provisioning government communications, the new company will also focus on developing advanced communications technologies including digital video, broadband and Internet Protocol television (IPTV).
"The combination of Intelsat and PanAmSat creates an industry leader with the ability to provide competitive communications and video services to consumers and businesses," David McGlade, Intelsat's CEO, said in a statement Monday. "The two companies are complementary in customer, geographic and product focus."
Upon the closing of the deal, McGlade will continue to serve as CEO and a director of the company. Joseph Wright, currently the PanAmSat CEO, is expected to become the new company's chairman of the board.
Under the agreement, Intelsat will acquire all outstanding common shares of PanAmSat, and additionally Intelsat will either refinance or assume approximately $3.2 billion in debt of PanAmSat Holding Corp. and its subsidiaries. Shareholders owning approximately 58 percent of PanAmSat's shares have agreed to vote in favor of the combination.
Intelsat and PanAmSat said Monday they anticipate the deal closing in 6-12 months.
"We will leverage our combined intellectual, material and people assets to continue the high-quality service Intelsat and PanAmSat customers have come to expect," said McGlade.
The merger agreement calls for the Intelsat to pay PanAmSat shareholders $25 per share, a nearly 40 percent premium over its IPO price of approximately six months ago. The combined company is expected to have pro forma annual revenues of more than $1.9 billion.
source: http://www.opticallynetworked.com/news/article.php/3530771 31aug2005
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