Intelsat buying PanAmSat for $3.2 billion By Sinead Carew and Steve James
NEW YORK (Reuters) - 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 (SESFd.PA) (SESF.LU), 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 (NYSE:NSE - news).
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. (OTC BB:LRLSQ.OB - news). 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. |
