US satellite imagery firms DigitalGlobe and GeoEye expect to wrap up their US$900m merger by 31 January after receiving the nod from the Department of Justice.
The antitrust clearance means the transformational deal is now just awaiting approval from…
US satellite imagery firms DigitalGlobe and GeoEye expect to wrap up their US$900m merger by 31 January after receiving the nod from the Department of Justice.
The antitrust clearance means the transformational deal is now just awaiting approval from the Federal Communications Commission and the National Oceanic and Atmospheric Administration.
If approved, the deal would bring together the two biggest imagery operators in the US, helping them tackle the expected fall in government spending on the EnhancedView programme that funds them.
Last month shareholders of both companies voted overwhelming in favour of the combination, which will see DigitalGlobe own around 64% of the enlarged entity, with GeoEye holding the remaining 36%.
The companies expect to generate more than US$1.5bn of NPV cost savings as a result of the merger, through lower cap ex spending and operational costs.
Raymond James analyst Chris Quilty believes the deal could generate operational cost savings of US$90m-US$120m per year.
“Post-merger, DigitalGlobe’s exposure to the US government should decline from 63% to ~50% concurrent with an improved growth bias,” stated Raymond James in a research note.
“Additionally, DigitalGlobe gains a ‘ground spare’ satellite, significant production and analytic capabilities, and new commercial customers.”
Quilty said DoJ approval represented the biggest hurdle to completing the merger, and he was confident of the combination going ahead as planned.
Upon closing, the satellite imagery operators expect to complete a US$1.2bn refinancing that is set to include a combination of senior notes and senior secured credit facilities.
Morgan Stanley and Bank of Tokyo-Mitsubishi UFJ have been mandated for this deal, which will refinance the merged group’s outstanding debt. DigitalGlobe has also increased its revolving credit facility by US$50m to US$150m to support the combined entity.
GeoEye shareholders have until 29 January to vote on the deal’s exact composition. They have the option of either 1.137 shares of DigitalGlobe’s common stock and US$4.10 per share in cash; 100% of the consideration in cash, which is equivalent to US$20.27; or 100% of the consideration in stock, equivalent to 1.425 shares of DigitalGlobe common stock, for each share of GeoEye stock they own.
The deal represents a valuation multiple of around five times GeoEye’s EV / FY2011 EBITDA.
Morgan Stanley and Barclays are financially advising DigitalGlobe, with Skadden, Arps, Slate, Meagher & Flom providing legal advice. Goldman Sachs, Convergence Advisers and Stone Key Partners are serving as GeoEye’s financial advisers, and Latham & Watkins and Kirkland & Ellis are its legal advisers.
