Private equity firm Carlyle Group has entered into a share purchase agreement with General Electric to acquire the latter’s 36.84% indirect stake in satellite operator AsiaSat.
Carlyle’s Asian fund, Carlyle Asia Partners IV, has formed an investment…
Private equity firm Carlyle Group has entered into a share purchase agreement with General Electric to acquire the latter’s 36.84% indirect stake in satellite operator AsiaSat.
Carlyle’s Asian fund, Carlyle Asia Partners IV, has formed an investment vehicle called Ganymede Investment Holdings which has agreed to buy GE’s stake in Bowenvale, a holding company owned by China International Trust and Investment Corporation (CITIC) and GE that is AsiaSat’s 74.43% majority shareholder.
Under the terms of the transaction, Ganymede is to pay HK$3.577bn (US$461.3m) in cash for GE’s 144.1 millions shares, representing a 49.5% economic and 50% voting interest, in Bowenvale.
The consideration, which will be paid in US dollars, will be increased to HK$3.747bn (US$483.3m) if either a market disruption event does not occur or a filing delay occurs.
The deal values AsiaSat at around HK$9.71bn (US$1.25bn), a multiple of 7.4 times the company’s 2013 EBITDA.
Goldman Sachs and BofA Merrill Lynch are advising Carlyle on the offer.
Deal triggers mandatory takeover offer
According to AsiaSat’s executive committee, once complete, the share purchase agreement would result in the formation of a new concert group with statutory control over the company. This would trigger a mandatory unconditional general offer obligation under the Hong Kong Takeovers Code.
Carlyle and CITC have agreed to this and will subsequently make a cash offer for all the issued shares not owned by Bowenvale.
There are 391.2 million AsiaSat shares in issue, of which just over 100 million (25.57%) are free float.
Bowenvale will offer HK$24.82 in cash per share, the same price that Carlyle is paying GE for its shares. This represents an 8.07% discount to the closing price of HK$27 on the last trading day before the offer (23 December) and a 7.66% discount on the share’s 30 day average.
An independent board committee comprising the company’s independent non-executive directors, James Watkins, Stephen Lee Hoi Yin, Kenneth McKelvie and Maura Wong Hung Hung, has been established to advise the shareholders on the offer. An independent financial adviser will also be appointed.
If the offer is successful and more than 90% of the free float is purchased, Bowenvale plans to exercise its compulsory acquisition rights to buy all the shares. It then intends to withdraw AsiaSat from the Hong Kong stock exchange and take it private.
AsiaSat’s management and Bowenvale had previously sought to take the company private back in mid-2012 but were stymied by the minority shareholders in the free float. Those independent stakeholders voted overwhelmingly against the plan.
Bowenvale eyes debt-funded special dividend
Carlyle and CITC have agreed that following a successful completion of both the share purchase agreement and mandatory takeover offer, AsiaSat would pay a special interim dividend of US$600m or HK$11.89 per share.
The dividend would be paid in cash out of the company’s reserves and through a proposed dividend loan facility of US$240m.
That financing, split between a term loan and revolving credit facilities, has already been agreed by a banking group comprising CTBC Bank (facilities agent), Cathay United Bank (security agent), Mega International Commercial Bank and ING (Singapore branch).
Proceeds from the dividend would be used fund both Carlyle Asia Partner’s acquisition of GE’s Bowenvale stake and the mandatory general offer.
In addition, the lending banks have agreed to provide US$296m of term loans to fund Carlyle’s share purchase agreement and up to US$200m of debt for the takeover offer.
The return of Genachowski
On completion, Carlyle intends to nominate three new members to the AsiaSat board – Alex Ying, Gregory Michael Zeluck and the former chairman of the Federal Communications Commission Julius Genachowski.
Genachowski served as head of the FCC from 2009 to 2013. He then joined Carlyle in January 2014 as a managing director in its US buyout team.
Their appointment would see the resignation of GE’s three AsiaSat board members, Sherwood Dodge, who is also the satellite operator’s chairman, John Connelly and Nancy Ku. Mark Chen will also stand down as a director of Bowenvale.
