British Investors Win Majority Stake in Intelsat
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Wednesday, June 20, 2007
Intelsat, the world's largest satellite company, agreed yesterday to sell the majority of its shares to London-based BC Partners, one of Europe's largest private-equity firms, in a deal worth about $16.4 billion.
BC Partners is to acquire 76 percent of the company for $5.03 billion and assume $11.4 billion of Intelsat's debt. The current owners of Intelsat -- private-equity firms Apax Partners, Apollo Management, Madison Dearborn Partners and Permira -- are to receive $4.6 billion in cash and keep 24 percent of the company.
Dianne VanBeber, Intelsat's vice president of investor relations, said no layoffs are expected as a result of the acquisition. However, the company will reduce its workforce of 1,200 to 1,000 by the end of 2008 under the terms of its merger with PanAmSat.
Standard & Poor's lowered Intelsat's credit rating yesterday because additional financing would add $3.85 billion to Intelsat's debt. Unless Intelsat shows it can reduce its debt within a reasonable time frame, that rating could drop further, S&P said in its report.
BC Partners beat out several other bidders, including a joint offer from Dish Network parent EchoStar Communications and Liberty Media, which controls DirecTV. Industry analysts said that combination would have posed significant regulatory hurdles. Other private-equity firms also participated in the auction, according to VanBeber.
Intelsat was bought by its current owners in 2004 for $3.1 billion in cash after going private and shedding its intergovernmental ownership in 2001. Last year, Intelsat purchased rival PanAmSat for $3.2 billion.
Intelsat's headquarters are in Bermuda, but the company controls 51 satellites from the District, where about 750 of its employees work.
The buyout of Intelsat continues a trend toward consolidation and private-equity interest in the industry over the past several years, analysts said.
"This is a good era right now" for satellite companies, said Roger Rusch, president of TelAstra, a consulting firm in Palos Verdes, Calif. "We've experienced a lot of growth in the demand for the type of services Intelsat provides, particularly in North America."
Some of that growth has been driven by the increased popularity of high-definition television, which requires more bandwidth -- raising revenue from Intelsat's satellites.
"The company has thrived under private-equity ownership," particularly because it helped finance the purchase of PanAmSat, David McGlade, Intelsat's chief executive, said in a statement. "As a result, we have a keen appreciation for the financial and strategic support that a firm such as BC Partners can provide."
BC Partners spokesman Richard Spiegelberg said Intelsat's business is stable and predictable, as evidenced by a backlog of orders from broadcast networks and cable providers.
The deal is expected to close within nine months pending regulatory approval from the Federal Communications Commission and the Justice Department.
