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Tech Almanac

Intelsat IPO Delayed for a Third Time
Company Revives Talks With Private Investors

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Intelsat Ltd.
_____Intelsat News_____
Lockheed Martin Sells Satellite Telecom Unit (The Washington Post, May 12, 2004)
TNS Prepares to Make Initial Public Offering (The Washington Post, Mar 16, 2004)
Intelsat Plans to Hold Long-Delayed Stock Sale Before July (The Washington Post, Feb 5, 2004)
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By Yuki Noguchi
Washington Post Staff Writer
Saturday, May 22, 2004; Page E01

Satellite pioneer Intelsat Ltd. announced yesterday that it again would delay plans to sell shares to the public, in part because there are parties interested in acquiring or investing in the company.

Company spokeswoman Dianne Van Beber declined to comment on the details of those negotiations, which it originally disclosed in an April filing with the Securities and Exchange Commission. It said it had suspended those discussions to prepare for its public offering, but "obviously, when [Congress] moved the IPO deadline, that gave us more time to explore options," she said.

The world's second-largest satellite company, which is incorporated in Pembroke, Bermuda, and has its headquarters in Washington, planned to raise as much as $500 million in the open market by the end of June. It had already delayed its public offering twice, pushing back the original December 2002 deadline because there was little demand for new technology shares on Wall Street. Intelsat was controlled by an international government consortium until 2001 and was required by Congress to go public as part of its privatization.

A source close to the company said that in March, several private investors approached Intelsat and expressed interest in an investment that would exceed the amount of the public offering. Those discussions stopped before the planned offering, but will likely resume and intensify in the next several months, said the source, who spoke only on the condition of anonymity because those talks are confidential.

"It would be a major deal" that would be better for shareholders and keep the company private, the source said.

Such a deal would likely resemble the $4.3 billion deal struck last month for a majority ownership in PanAmSat Corp., the source said. In that deal, investment firm Kohlberg Kravis Roberts & Co. outbid several other private-equity firms to buy the 80.5 percent stake in PanAmSat held by the DirecTV Group.

Other parties that bid for PanAmSat -- Blackstone Group LP, District-based Carlyle Group LLC and Providence Equity Partners Inc. -- could also be involved in a deal for Intelsat, the source close to Intelsat said. Intelsat has retained investment banks Morgan Stanley and Merrill Lynch & Co. to explore its options.

"I think it's much more likely that they could get a private deal done before they go public," said an analyst, who asked not to be identified because his investment firm worked on Intelsat's planned public offering.

Legislation was signed this week that allowed Intelsat to delay its offering until as late as Dec. 31, 2005. The company had lobbied for that delay. "I believe we need to provide Intelsat with an extension on its IPO deadline because market conditions are not favorable at this time -- the market is simply not conducive for a successful IPO," sponsoring Sen. Conrad Burns (R-Mont.) said through a spokeswoman. "Without the extension, several U.S. entities who are major investors in Intelsat would stand to lose hundreds of millions of dollars because the telecom market for IPOs is far from ideal."

It is highly unusual for a private company to be required by law to sell shares to the public. But Intelsat is also unusual. Founded in 1964 as a cooperative by an act of Congress, it remained under the control of more than 140 governments until 2001.

"In light of the extension . . . and the interest we received regarding a possible investment in or acquisition of our company . . . we now intend to resume the exploration of this possibility," Conny L. Kullman, chief executive of Intelsat, said in a written statement.

The satellite industry is consolidating. Last week, Intelsat said it would purchase Comsat General Corp., a unit of Lockheed Martin Corp. that provides satellite and other communications services to the federal government, for about $90 million. In March, Intelsat purchased six North American satellite slots out of bankruptcy from Loral Space & Communications Corp.

The company earned $181.1 million on $952.8 million in sales last year, but its core business selling telecommunications capacity has been declining. Satellite companies like Intelsat face fierce price competition from fiber-optic cable operators that carry traffic at cheaper rates. To make up for that decline, Intelsat has been investing in its broadcast, Internet and other businesses.


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