DigitalGlobe has strongly rejected GeoEye’s US$17.00 per share unsolicited takeover offer claiming that it ‘substantially undervalues the company and is not in the best interests of the stockholders’ and that it was ‘made in desperation’.
In a…
DigitalGlobe has strongly rejected GeoEye’s US$17.00 per share unsolicited takeover offer claiming that it ‘substantially undervalues the company and is not in the best interests of the stockholders’ and that it was ‘made in desperation’.
In a statement, DigitalGlobe added that its “Board determined that GeoEye’s proposal does not adequately recognize DigitalGlobe’s superior track record of financial and operating performance as well as its constellation’s greater capabilities.”
Furthermore, DigitalGlobe revealed that during the two parties’ private discussions over the past few months, it had rejected previous unsolicited proposals by GeoEye. DigitalGlobe stated that it believes those hostile offers were made in desperation and were motivated by GeoEye’s concerns with the disproportionate risks of government budgets cuts affecting its business.
As such, DigitalGlobe claims it was willing to discuss a deal whereby DigitalGlobe acquired GeoEye, in a transaction that would see its stockholders own approximately 60% and GeoEye stockholders approximately 40% of the combined company, with DigitalGlobe’s chairman and CEO continuing in their respective positions. According to DigitalGlobe, this offer was retracted after the company believed that the US government’s budget decision regarding EnhancedView would be favourable to DigitalGlobe and that any protracted discussions would be disruptive to the state’s decision making process.
However, following GeoEye’s public offer, DigitalGlobe again made the same takeover proposal, conditioned on reaching an agreement over the weekend. This was subsequently rejected by GeoEye, although DigitalGlobe said that it might consider reviving its offer after the government had reached it decision.
In a letter to GeoEye CEO Matt O’Connell dated 6 May 2012, DigitalGlobe’s CEO Jeffrey Tarr stated: “Given the abruptness of your “public offer” and our past discussions, we believe you made your hostile bid in desperation due to well-publicized concerns about potential government decisions that may jeopardize your portion of the EnhancedView program.
“We believe you initiated discussions with us with your unsolicited highly conditional private offer on 7 February 2012 because you were concerned about a disproportionate risk of budget cuts affecting GeoEye. We believe you have mischaracterized subsequent discussions in your 4 May letter as well as during your Friday investor call. In fact, we believe your public description of such discussions in your May 4 letter is materially misleading and incomplete.
In response, Matt O’Connell stated: “We are disappointed that DigitalGlobe’s Board of Directors has rejected our highly attractive proposed acquisition. We believe, and DigitalGlobe appears to agree, that combining these two companies makes clear strategic sense. A combined company would generate substantial synergies while better satisfying the needs of all customers, domestic and international.”
GeoEye said that it will now consider its options in light of DigitalGlobe’s rejection.
DigitalGlobe has hired Morgan Stanley and Barclays to provide financial advice and Skadden, Arps, Slate, Meagher & Flom legal advice on the offer. Goldman Sachs and Convergence Advisors are advising GeoEye on its bid, while Latham & Watkins is its legal counsel.
