Source: http://www.nytimes.com/2005/08/29/business/29deal.html?adxnnl=1&pagewanted=print&adxnnlx=1125338818-YFdgJgGp2UkA9ms0BYHhZA
Intelsat to Acquire Rival PanAmSat for $3.2 Billion
August 29, 2005
Intelsat to Acquire Rival PanAmSat for $3.2 Billion
By ANDREW ROSS SORKIN and KEN BELSON
Intelsat plans to announce today that it has agreed to acquire a rival, the PanAmSat Holding Corporation, creating the world's largest operator of satellites that distribute data and video programming for clients.
Intelsat, which is a private company, will pay $3.2 billion, or $25 a share, for PanAmSat, executives at the companies said. It will use cash to pay for the shares, which it is buying at a price that is almost 40 percent higher than the trading price just after PanAmSat's initial public offering in March. On Friday, PanAmSat shares closed at $19.80, down 3 cents, on the New York Stock Exchange.
Intelsat will also take over $3.2 billion in PanAmSat's debt.
The combined company will have 53 satellites - 28 from Intelsat and 25 from PanAmSat - and annual revenue of $1.9 billion. Executives for the companies hope to receive regulatory approval for the deal in 6 to 12 months.
The two companies have complementary businesses. Intelsat has large contracts with the United States government, and about half of PanAmSat's revenue comes from providers of video programming like Disney, Time Warner and HBO, which need their shows beamed to cable companies.
Intelsat is particularly strong outside the United States, while most of PanAmSat's satellites hover over North America.
"The two companies are complementary in customer, geographic and product focus," said David McGlade, Intelsat's chief executive officer, who will remain in that job if the merger is approved by regulators.
The deal is the latest and largest in a fast-consolidating industry. A glut of satellite launchings in the 1990's sent prices tumbling and pushed several big players into bankruptcy.
But in the last couple of years the industry has stabilized after rounds of cost cutting, fewer launchings and an upturn in demand for broadband services and video products like high-definition television and video-on-demand.
Wholesale satellite distributors like Intelsat and PanAmSat face fierce competition from big rivals like SES and Eutelsat in Europe, as well as companies that operate global fiber-optic networks. Prices for transporting video, data and phone calls across continents and oceans plunged following the collapse of the technology bubble of the 1990's and continue to slide even now.
But Intelsat, PanAmSat and other satellite distributors are still some of the only companies able to provide video, Internet and phone services to developing countries and remote regions that lack sophisticated fiber networks.
Intelsat's purchase is a victory for Kohlberg Kravis Roberts, the Carlyle Group and Providence Equity Partners, which bought PanAmSat last year and own 58 percent of its shares. Of the remaining shares, 40 percent are traded publicly and management owns 2 percent.
Credit Suisse First Boston is Intelsat's financial adviser. Its legal advisers are Wachtell, Lipton Rosen & Katz; Paul, Weiss, Rifkind, Wharton & Garrison, and Milbank, Tweed, Hadley & McCloy. Morgan Stanley is serving as PanAmSat's financial adviser, and Simpson Thacher & Bartlett is serving as PanAmSat's legal adviser.
Intelsat to Acquire Rival PanAmSat for $3.2 Billion
August 29, 2005
Intelsat to Acquire Rival PanAmSat for $3.2 Billion
By ANDREW ROSS SORKIN and KEN BELSON
Intelsat plans to announce today that it has agreed to acquire a rival, the PanAmSat Holding Corporation, creating the world's largest operator of satellites that distribute data and video programming for clients.
Intelsat, which is a private company, will pay $3.2 billion, or $25 a share, for PanAmSat, executives at the companies said. It will use cash to pay for the shares, which it is buying at a price that is almost 40 percent higher than the trading price just after PanAmSat's initial public offering in March. On Friday, PanAmSat shares closed at $19.80, down 3 cents, on the New York Stock Exchange.
Intelsat will also take over $3.2 billion in PanAmSat's debt.
The combined company will have 53 satellites - 28 from Intelsat and 25 from PanAmSat - and annual revenue of $1.9 billion. Executives for the companies hope to receive regulatory approval for the deal in 6 to 12 months.
The two companies have complementary businesses. Intelsat has large contracts with the United States government, and about half of PanAmSat's revenue comes from providers of video programming like Disney, Time Warner and HBO, which need their shows beamed to cable companies.
Intelsat is particularly strong outside the United States, while most of PanAmSat's satellites hover over North America.
"The two companies are complementary in customer, geographic and product focus," said David McGlade, Intelsat's chief executive officer, who will remain in that job if the merger is approved by regulators.
The deal is the latest and largest in a fast-consolidating industry. A glut of satellite launchings in the 1990's sent prices tumbling and pushed several big players into bankruptcy.
But in the last couple of years the industry has stabilized after rounds of cost cutting, fewer launchings and an upturn in demand for broadband services and video products like high-definition television and video-on-demand.
Wholesale satellite distributors like Intelsat and PanAmSat face fierce competition from big rivals like SES and Eutelsat in Europe, as well as companies that operate global fiber-optic networks. Prices for transporting video, data and phone calls across continents and oceans plunged following the collapse of the technology bubble of the 1990's and continue to slide even now.
But Intelsat, PanAmSat and other satellite distributors are still some of the only companies able to provide video, Internet and phone services to developing countries and remote regions that lack sophisticated fiber networks.
Intelsat's purchase is a victory for Kohlberg Kravis Roberts, the Carlyle Group and Providence Equity Partners, which bought PanAmSat last year and own 58 percent of its shares. Of the remaining shares, 40 percent are traded publicly and management owns 2 percent.
Credit Suisse First Boston is Intelsat's financial adviser. Its legal advisers are Wachtell, Lipton Rosen & Katz; Paul, Weiss, Rifkind, Wharton & Garrison, and Milbank, Tweed, Hadley & McCloy. Morgan Stanley is serving as PanAmSat's financial adviser, and Simpson Thacher & Bartlett is serving as PanAmSat's legal adviser.
