Global Eagle Acquisition Corp, a special purpose acquisition company set up by media veterans Harry Sloan and Jeff Sagansky, has signed a definitive agreement to acquire both satellite-based in-flight broadband service provider Row 44 and German…
Global Eagle Acquisition Corp, a special purpose acquisition company set up by media veterans Harry Sloan and Jeff Sagansky, has signed a definitive agreement to acquire both satellite-based in-flight broadband service provider Row 44 and German in-flight entertainment solutions firm Advanced Inflight Alliance (AIA) for approximately US$430m.
Under the terms of the proposed business combination, Global Eagle will acquire 100% of Row 44 through the issuance of approximately 25 million shares of common stock representing a total consideration of US$250m.
Concurrently, the SPAC will acquire the entirety of US private equity firm PAR Capital Management’s 86% stake in AIA in return for around 14.37 million new shares of non-voting Golden Eagle common stock. The exchange represents a purchase price of €5.50 per share, equating to a total consideration of approximately €112.56m (US$143.7m).
The remaining 14% of AIA will continue to be held as free-float trading on the Frankfurt Stock Exchange.
In support of the transaction, the SPAC has entered into backstop agreements with a group of institutional investors, including PAR, to purchase 7.125 million Global Eagle shares, at US$10 per share, in the event of redemptions.
While the boards of Global Eagle, Row 44 and PAR have unanimously approved the deal, the transaction still requires shareholder approval from Global Eagle and Row 44, as well as regulatory approval. It is also conditioned upon no more than 12.7 million of the existing 19 million Global Eagle public shares being redeemed.
Nonetheless, the acquisition is expected to be completed in January 2013 following which the three companies will be combined and renamed Global Eagle Entertainment, trading on the NASDAQ under the symbol ‘ENT’.
All the members of the Row 44 and AIA senior management teams, including John LaValle as CEO of Row 44 and Louis Belanger-Martin as CEO of AIA, will continue in their current positions under the new ownership structure.
Commenting on the transaction, Harry Sloan, chairman and CEO of Global Eagle, stated, “By combining AIA’s access to the installed in-flight entertainment market with Row 44’s WiFi to mobile device capability, Global Eagle has potential access to 100% of the airline passenger experience, creating an addressable market as large as the global airline industry.
“This is exactly the kind of worldwide digital media opportunity we’ve been seeking for Global Eagle since our IPO; and this is also a platform for Jeff and me to utilize our media and content relationships and experience to drive expansion and enhancement of in-flight content and programming around the world.”
Sloan, the former CEO and chairman of MGM prior to its bankruptcy, and Sagansky, previously the president of CBS entertainment, formed Global Eagle in May 2011. The company raised US$190m through its IPO, the largest amount raised via a US-based SPAC for five years.
Sloan said that this money will predominantly be used for working capital and the future capital expenditure requirements of Global Eagle Entertainment. The new firm will have a market cap of about US$630m and minimal debt.
Citigroup is acting as lead capital markets adviser to Global Eagle, with BofA Merrill Lynch and Citi providing financial advice. RBC Capital Markets is advising AIA, while Seabury Group is providing advisory services to Row 44. McDermott Will & Emery is legal counsel to Global Eagle, while Goodwin Procter and SJ Berwin are legal advisers to PAR and Strategic Law Partners counsel to Row 44.
PAR the dealmaker
The US private equity firm has played a central role in this complex transaction. Back in June 2012, PAR financed the entirety of Row 44’s US$45m private funding round increasing its stake in the in-flight broadband provider to just under 50%.
PAR then gave AIA a portion of its Row 44 holding, around 12.5%, as part of wider transaction between the two. In return, PAR increased its stake in AIA from around 29% to 47% and with it triggered an obligation under Deutsche Borse rules to launch a public tender offer.
At the end of the tender offer in early July, PAR had raised its share to 86% and was ostensibly the controlling shareholder in both Row 44 and AIA. Edward Shapiro, a partner at PAR, subsequently became chairman of both companies.
Shapiro has known both Sloan and Sagansky for over ten years and the three will now work together on expanding Global Eagle entertainment.
Assuming no redemptions of Global Eagle stock, the final ownership structure of Global Eagle Entertainment will be as follows: the current stockholders of Global Eagle with 39%, PAR also with 39%, the other Row 44 shareholders 17% and AIA (the majority of which will be owned by Global Eagle) with 5%.
