Global satellite communications group Inmarsat (ISAT) has recommended a takeover offer from a consortium that values the beleaguered group at around $3.3bn (£2.5bn).
Management initially confirmed media speculation that it had received a non-binding proposal from private equity firm Apax Partners, Warburg Pincus and Canada Pension Plan Investment Board on 31 January 2019. Ontario Teachers’ Pension Plan Board subsequently joined the consortium.
The deal values each Inmarsat share at $7.21 (546p), representing a respectable 27 per cent premium to Inmarsat’s closing price on the day prior to notification. The shares climbed by nearly a fifth on the day the deal was mooted. The offer comprises $7.09 and a $0.12-a-share dividend to be paid on 30 May, to shareholders on the register by 23 April.
The board had received irrevocable undertakings from shareholders representing 11.4 per cent of the group’s outstanding share capital by 22 March. The general meeting is expected to take place before 31 May.
Last July, Inmarsat’s board rejected an offer from EchoStar “on the basis that it very significantly undervalued Inmarsat and its standalone prospects”. The offer was withdrawn. In June, Eutelsat said it was “evaluating a possible offer for Inmarsat”, although said it did not intend to proceed with an offer the next day.
Last year, Inmarsat’s largest division – maritime – endured a 2.6 per cent sales dip to $553m. Meanwhile, the division’s cash profits here also declined by 4 per cent to $429m, reflecting higher costs, including provisions against potential future bad debts. The maritime and enterprise divisions have faced rising competition in recent years, while hefty capital expenditure requirements have resulted in five consecutive years of declining pre-tax profits.
The bidders said “Inmarsat’s end markets, notably maritime and government, are competitive”, but the group was “well positioned for growth based on its unique global infrastructure, leading technological and capacity roadmap and strong spectrum holdings”.
Management expects revenues (excluding Ligado) of $1.3bn-$1.4bn in 2019. Although it still expects cash capital expenditure of $500m-$600m a year for 2019 and 2020, this should “meaningfully moderate” thereafter, falling to $450m-$550m in 2021.
