Satellite imaging operator GeoEye has amended its rights agreement lifting the percentage that a shareholder may own in the company without having to make an outright bid.
Under the amendment, a single shareholder is now permitted to own up to 30% of…
Satellite imaging operator GeoEye has amended its rights agreement lifting the percentage that a shareholder may own in the company without having to make an outright bid.
Under the amendment, a single shareholder is now permitted to own up to 30% of GeoEye’s share capital without triggering an acquisition clause. The previous threshold was 25%, which was itself increased from the original 20% limit at the end of 2011.
The reason for this move is that the hedge fund Cerberus Capital Management has informed GeoEye that it intends to increase its ownership over the previous 25% threshold. As of 7 February, Cerberus owned approximately 24.1% of the company.
To that end, GeoEye entered into a standstill letter agreement with Cerberus under which the latter has agreed not to increase its holding above 29.99% before the earlier of 30 June 2013 or the successful launch and operation of GeoEye-2, which is scheduled to be lofted by a Lockheed Martin Atlas-5 rocket in early 2013.
In addition, Cerberus has agreed not to participate in any potential takeover consortium, sell down more than 25% of its stake in one go and seek to obtain additional members of the GeoEye board.
Cerberus became a significant shareholder in GeoEye in March 2010 when the two parties signed a financing deal of up to US$215m designed to enable satellite imaging company to bid for EnhancedView, the US government’s satellite imaging procurement contract.
In order to participate, GeoEye was initially required to provide a letter of credit proving they have the necessary collateral to support the building of an earth observation satellite. However, when the final decision was made, GeoEye was awarded a ten-year EnhancedView contract, worth US$3.8bn, without the letter of credit and this in turn reduced the size of the financing arrangement with Cerberus.
Under the adjusted financing, Cerberus acquired 80,000 preferred shares at a conversion price of US$29.76 per giving it a stake of approximately 10%.
GeoEye recently announced that it has successfully completed the final critical design review for the EnhancedView program after the National Geospatial-Intelligence Agency (NGA) approved the analysis. The requirements for the program include the development of GeoEye-2 and an upgraded ground system architecture.
However, the NGA is widely expected to reduce its expenditure on EnhancedView this year if the expected cuts in the agency’s budget come into effect. The National Intelligence Program, of which the NGA is part, had sought approximately US$55bn of funding for 2013 but in his fiscal 2013 budget proposal, President Obama allotted US$52.6bn to the intelligence agencies.
