Inmarsat to go private in $3.4 billion buyout deal

LONDON: A private equity-led consortium agreed to buy Inmarsat Plc for about $3.4 billion in cash after the British satellite operator last year rebuffed a slightly lower bid from US rival EchoStar.

The consortium includes UK-based Apax Partners, U.S.-based Warburg Pincus and Canada Pension Plan Investment Board (CPPIB) and Ontario Teachers’ Pension Plan Board.

Inmarsat shareholders will get $7.21 cash, or 546 pence per share. Inmarsat’s shares were up 8.5 per cent at 549 pence by 0910 GMT, just above the offer price.

A takeover of the company could be closely scrutinised by the British authorities because of Inmarsat’s position as a strategic asset.

The company was the first international satellite operator to be privatised, and Apax was part of the group that invested in 2003, before taking it public two years later.

The offer comprises cash of $7.09 for each share plus a previously agreed final dividend of $0.12 per share, representing a nearly 45 per cent premium to Inmarsat’s close on Feb. 27, a day before media reports said EchoStar was expected to renew its interest in the company.

Inmarsat is a long established provider of communication services to shipping and sees a growing opportunity to supply in-flight broadband services to commercial aircraft.

The consortium said it received support from Inmarsat’s top shareholder Lansdowne Partners, which holds about an 11.4 per cent stake in the company.

The consortium’s approach, which was made on Jan. 31 but disclosed only last week, comes after Inmarsat rebuffed a $3.25 billion cash and stock bid from EchoStar last summer.

Colorado-based EchoStar had proposed a cash and stock offer of 265 pence in cash and 0.0777 EchoStar shares for every Inmarsat share held, which valued Inmarsat at about 532 pence-a-share at the time.

Inmarsat had argued it “very significantly undervalued” the company and its standalone prospects and EchoStar dropped the bid last July.

Inmarsat said its directors consider the terms of the latest deal to be “fair and reasonable” and intends to unanimously recommend that shareholders vote in favour of the deal.

Inmarsat has been investing heavily in its networks, particularly focusing on in-flight connectivity, and as a result cut its dividend last year.

The stock has struggled in recent years as revenue in its maritime business - which is responsible for 41 per cent of its total - has been eroded by competitors.

Inmarsat sees capital expeses moderating after 2020, which it hopes will boost cashflow. It also expects significant growth in markets including aviation and providing communications to the government.

Inmarsat was advised by J.P. Morgan Cazenove, PJT Partners and Credit Suisse on the financial terms. Meanwhile, Mining giants Rio Tinto, BHP Group and Fortescue Metals said their Australian operations had suffered some impact after two cyclones hit the country over the weekend, with clean up starting on Monday in the wake of the storms.

Cyclone Veronica has been weakening after battering Australia’s northwest, while further east, Cyclone Trevor was downgraded to a low pressure system on Sunday.

Businesses affected included those in the iron ore export hubs of the Pilbara region, as well as Rio Tinto’s bauxite operations in Weipa to the east.

Rio said in a statement on Monday that some of its iron ore mining and rail operations had been impacted by the weather, but that there had been no reports of injuries to employees.

“Normal operations will resume once safe to do so,” it said. The key iron ore ports of Port Hedland, Dampier and Ashburton remained closed, operator Pilbara Ports said on Monday.

Rio is the main exporter at Dampier, while BHP and Fortescue ship from Port Hedland.

BHP said that it had deployed staff to assess the overall effect of the weather at its sites, with any impact on production to be reported in its next operational review due in April.

“Initial inspections show water damage to some buildings at Nelson Point (in Port Hedland) and we are currently working through this situation,” a spokeswoman said in a statement emailed to Reuters.

Fortescue said it expected a 1.5 to 2 million tonnes of iron ore shipments to be delayed due to Veronica, assuming that Port Hedland reopened in the next day. “Tropical Cyclone Veronica is expected to weaken further as it tracks westwards close to the Pilbara coast today. Conditions have eased at Port Hedland,” Australia’s weather bureau said on Monday.

Meanwhile, global miner Glencore said its McArthur River zinc operations and nearby loading facility in northern Australia were returning to normal following Cyclone Trevor. “All our workforce have remained safe and our infrastructure and water management systems are in excellent condition,” the firm said in an emailed statement.

Reuters