Firm to Acquire SkyTerra, Take It Private

Reston-based satellite firm SkyTerra said Wednesday that it has agreed to be acquired by its biggest shareholder in a roughly $280 million transaction that will return the company to private ownership.

Under the deal, New York-based investment firm Harbinger Capital Partners will pay $5 per common share of SkyTerra -- a 56 percent premium over the stock's average price in the month before the announcement. SkyTerra shares gained more than 38 percent on Wednesday, closing at $4.71.

SkyTerra's main product, a new type of phone service, is still in the works. Starting next year, the firm plans to launch a pair of satellites that will eventually help it meld cellphone service with satellite phone service. If a caller, using one of SkyTerra's phones, travels outside the range of terrestrial cell towers, that call will automatically switch over to the company's satellite service.

The firm hopes that government customers and emergency responders will be early adopters of the service, which is scheduled to launch in 2011. In the long run, the company hopes to win over mainstream consumers. Last month, SkyTerra said that it had applied for $37 million in federal stimulus funding aimed at expanding broadband networks in the United States.

Harbinger, which has invested in other satellite industry players, loaned $500 million to SkyTerra in July 2008 and now owns more than 48 percent of the company's common stock.

The investment firm is also a major shareholder in TerreStar, a Reston-based company that is gearing up to offer a hybrid phone service similar to SkyTerra's. Harbinger also owns a chunk of British satellite operator Inmarsat and has signaled an interest in possibly taking over that company as well.

Tom Surface, director of corporate communications with SkyTerra, said the company expects the deal to be completed later this year or in early 2010.

"This transaction will not affect our operations, our relationships with customers or our planned launch of our next-generation integrated satellite terrestrial network," he said.

The deal is subject to approval by the Federal Communications Commission and other regulators. As Harbinger already owns nearly half of SkyTerra's stock, the deal is almost certain to win shareholder approval.

Harbinger's chief investment officer, Philip Falcone, is one of the world's richest men. Falcone was one of five hedge fund managers who testified on Capitol Hill last year, as the House Committee on Oversight and Government Reform looked into whether hedge funds should be more tightly regulated, and whether hedge funds bear the blame for the nation's current economic problems.