Shares in mobile satellite operator Inmarsat jumped 4.7% in a day to over £7 a share as investors reacted to media speculation that the company could be set to be the target of a leveraged buy out.
A Forbes blog claimed that Texas Pacific Group was…
Shares in mobile satellite operator Inmarsat jumped 4.7% in a day to over £7 a share as investors reacted to media speculation that the company could be set to be the target of a leveraged buy out.
A Forbes blog claimed that Texas Pacific Group was lining up a bid for Inmarsat, although the private equity firm declined to comment on the rumour.
According to one SatelliteFinance source, any offer would likely need to be at a premium of around 25% to the company at approximately £8.50 per share. This represents a valuation multiple of approximately 10.7 times Inmarsat’s full year 2010 EBITDA and values the company at about US$7.3bn.
Given the current bank appetite for financing LBOs, the sponsor would need to offer close to 50% of the purchase price in equity, meaning that the debt portion would be around US$3.65bn. While this is sizeable, given Inmarsat’s strong cash flow generation and EBITDA margin of 58.6% it would certainly be serviceable.
In mid-2008, hedge fund Harbinger Capital Partners revealed its plans to acquire Inmarsat through its US subsidiary SkyTerra. At the time, no formal terms of an offer were set as regulatory approval was sought first, a process that was expected take around 12 to 18 months. In the interim, Harbinger shifted its focus onto its LightSquared project in the US and is understood to be no longer interested in taking over Inmarsat. However, the hedge fund remains Inmarsat’s largest shareholder with a 28.8% stake.
Given that Harbinger and LightSquared recently triggered the L-band cooperation agreement with Inmarsat, which this includes an option for LightSquared to lease a portion of Inmarsat’s spectrum, Harbinger has less of a strategic need to maintain its holding in Inmarsat and may seek an exit. According to one banker, this opens up the possibility of a sponsor such as TPG purchasing Harbinger’s stake as an initial stepping stone prior to an eventual takeover.
