On September 22, 2008, GHL Acquisition (stock symbol: [t]GHQ[/t]), which raised $400 million when it went public in February 2008, announced that it has signed a definitive agreement to acquire Iridium Holdings, LLC. While the company has filed its preliminary proxy materials, it has not yet set a date for its shareholder meeting. If the company does not complete the acquisition by February 14, 2010, the company will have to liquidate.
The original transaction was recut in April 2009:
GHL ACQUISITION CORP. AND IRIDIUM HOLDINGS LLC
ANNOUNCE AMENDMENT TO TRANSACTION AGREEMENT
-- Transaction Cost to GHL Acquisition Reduced by 15% to Reflect Changes in Market Valuation Levels Since Transaction Announcement
-- Iridium Expects Full-Year 2009 Operational EBITDA of $120-130 million, Up 11 to 20% Over 2008, Reflecting Continued Strength of the Business in the Face of Weak Global Economy
NEW YORK, NY and BETHESDA, MD, April 28, 2009 – GHL Acquisition Corp. [NYX: GHQ] (“GHL Acquisition”) and Iridium Holdings LLC (“Iridium” or the “Company”), a leading provider of voice and data mobile satellite services, today jointly announced the signing of an amendment to the definitive agreement under which they plan to combine. Under the terms of the amendment, the aggregate consideration payable by GHL Acquisition to Iridium’s existing shareholders will be reduced by 15%, a reflection of the changes in market valuation levels since the transaction was announced in September 2008. The amended agreement, unanimously approved by the Board of Directors of GHL Acquisition and Iridium as well as Iridium’s major shareholders, values Iridium at an enterprise value of approximately $517.3 million.
Scott L. Bok, Chief Executive Officer of GHL Acquisition, said: “We continue to believe Iridium will be a great investment for us, and the Company’s guidance today makes clear that the price reduction is a function of lower equity market valuations rather than any disappointments relative to the Company’s strong record of growth and profitability. The new purchase price negotiated with Iridium’s current shareholders takes into consideration the decline in global markets since the transaction was announced in September 2008, and allows the Company to retain a slightly larger cash balance post-transaction, reflecting both lower equity market valuations generally and our desire to reduce the Company’s needs for future outside financing. With the amendments to our transaction agreement announced today, we believe the pro forma fully distributed valuation of our combined company is even more attractive relative to Iridium’s closest comparables.”
Matt Desch, Chief Executive Officer of Iridium, said: “Considering the current economic backdrop, Iridium’s growth and profitability are a testament to the Company’s business model and mission-critical position with its customers. We anticipate that our subscriber base will experience growth of approximately 20% this year. We also anticipate strong growth in commercial and government service revenues that will be partially offset by a decline in equipment sales, resulting in total revenue growth in the low single digits over the full year 2008. This, combined with our largely fixed cost business model, is expected to result in Operational EBITDA for the full year 2009 of between $120 and $130 million, implying a growth rate of between 11% and 20% over the full year 2008. With these strong results and the amendments to the transaction agreement announced today, we believe Iridium is better positioned than ever to complete the planned transaction and continue its impressive growth trajectory.”
Separately, Greenhill & Co. agreed to forfeit 2.0 million additional warrants purchased by it from GHL Acquisition in a private placement concurrently with GHL Acquisition’s IPO. In addition, GHL Acquisition has withdrawn its plan to launch a tender offer for GHL Acquisition shares concurrent with closing of the combination with Iridium.
Details of the Amended Transaction
Under amended terms of the transaction:
-- The transaction values Iridium at an enterprise value of approximately $517.3 million.
-- Current shareholders of Iridium will receive $77.1 million of cash and approximately 29.4 million common shares upon completion of the transaction. Additionally, after closing of the transaction, current shareholders of Iridium will receive a $25.5 million payment for facilitating a step-up in the tax basis of Iridium’s assets, resulting in future tax savings for the Company.
-- Remaining cash held in trust will be available to retire Iridium’s current net indebtedness of approximately $145.8 million, pay transaction-related expenses including deferred compensation to GHL Acquisition’s underwriters, and be used by Iridium for general corporate purposes and capital expenditures.
-- Greenhill & Co.’s $22.9 million pre-completion investment in Iridium will be convertible into approximately 1.9 million GHL Acquisition shares.
-- Post-transaction and after the Greenhill & Co. forfeitures described below, GHL Acquisition will have approximately 78.4 million shares and 44.1 million warrants outstanding, assuming no GHL Acquisition public shareholders vote against the transaction and elect conversion. In the case that 30% of GHL Acquisition’s current public shareholders vote against the transaction and elect conversion, approximately 68.4 million shares and 44.1 million warrants will be outstanding.
Completion of the transaction is subject to Federal Communications Commission approval, GHL Acquisition stockholder approval and other customary closing conditions, and is expected to occur this summer.
Securities Forfeitures by Greenhill & Co.
Effective upon completion of the transaction, Greenhill & Co. has agreed to forfeit the following GHL Acquisition securities which it currently owns: (1) 1,441,176 common shares; (2) 8,369,563 founder warrants; and (3) 4,000,000 private placement warrants. These forfeitures will reduce the combined company’s shares and warrants outstanding immediately post-closing.
Necessary Steps for Consummation of the Transaction
GHL Acquisition cannot complete the transaction unless (1) a majority of the shares issued in the initial public offering cast at the Special Stockholders’ Meeting, to be scheduled, are voted in favor of the transaction; (2) holders of no more than 11,999,999 shares of common stock (such number representing 30 percent minus one share of the 40,000,000 shares of GHL Acquisition issued in the initial public offering) vote against the transaction and validly exercise their conversion rights to have their shares converted into cash; and (3) certain other customary conditions are satisfied.
As provided in GHL Acquisition’s certificate of incorporation, each holder of GHL Acquisition’s common stock has the right to convert such holder’s shares into cash if such holder votes against the transaction, validly exercises such holder’s conversion rights and the transaction is approved and completed.
GHL Acquisition’s initial stockholders have agreed to vote the 8,500,000 shares they already own, which were issued to them prior to GHL Acquisition’s initial public offering, in accordance with the vote of the holders of a majority of the shares issued in the initial public offering.
Conference Call Information
GHL Acquisition and Iridium will host a conference call for analysts, investors and other interested parties on Wednesday, April 29, 2009, at 9:30 a.m. Eastern Time (ET) to discuss the transaction.
To participate, please call the toll-free number 866-481-9047 (U.S. callers only) or, from outside the U.S., 706-902-1870. The passcode for the live call is 97492335. For those unable to participate in the live call, a replay of the call will be available for 30 days toll-free at 800-642-1687 (U.S. callers only), or at 706-645-9291 (callers outside the U.S.). The passcode for the replay is 97492335.
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