America's oldest satellite company Intelsat on Tuesday said it is being purchased by a group of private investors for $5 billion in cash and the assumption of debt.
The deal, completed early this morning in Bermuda, marks a big transition for Intelsat, which for most of its 40-year history has been owned and governed by companies representing governments around the world.
Intelsat is incorporated in Bermuda, but the bulk of its corporate operations and most of its 900 employees work out of its large mirrored-glass building in North-west Washington.
At one time Intelsat was based here and owned by the governments of the world, with the US being the largest shareholder. It was the first in the business. However, the US insisted on privatising it and it shifted its headquarters to Bermuda.
If the deal wins regulatory and shareholder approval, Intelsat, which is best known for transmitting the first satellite phone call and for transmitting international broadcasts such as the Olympics, will be owned by a conglomerate of four private-equity groups: Apax Partners; Apollo Management; Madison Dearborn Partners; and Permira.
The buyers will pay Intelsat's 200 shareholders$ 18.75 per share, or $3 billion in cash, and will assume Intelsat's $2 billion in debt.
Lockheed Martin Corp. of Bethesda is by far Intelsat's biggest shareholder, owning 24 per cent of the company, followed by Indian telecom firm Videsh Sanchar Nigam Ltd and France Telecom, which own about five per cent.
"Once completed, this transaction will both satisfy our shareholders' interest in a strong valuation and allow shareholders to monetize their investments," Intelsat chief executive Conny Kullman said in a statement.
The deal is expected to close by the end of the year, pending antitrust and Federal Communications Commission reviews.
Intelsat's management will stay in place "for the time being," although the investors may eventually decide to make a change, said Dianne VanBeber, a spokeswoman for Intelsat.
In a statement, the investors said Intelsat was a good investment. "Intelsat's healthy, young and flexible satellite fleet, seasoned management team, strong brand and solid backlog of long-term contracts create a very attractive investment opportunity."
The investor group, which calls itself Zeus Holdings Ltd., outbid other investors like Blackstone Group, KKR, Texas Pacific Group and Francisco Partners, all of which had submitted bids, according to sources close to the deal.
Until May, Intelsat planned to issue shares to the public, but it delayed those plans because management felt it could get a better deal for shareholders by negotiating a private sale.
The deal comes close on the heels of several other private deals to buy satellite companies, including PanAmSat Corp. and Inmarsat.
According to federal law, Intelsat is required to issue shares to the public by June 30, 2005. It will petition the Federal Communications Commission to do away with that requirement, said VanBeber, for Intelsat.
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