SatelliteFinance understands that Loral Space & Communications is running a parallel process for its satellite manufacturer Space Systems Loral and is considering a full sale of it subsidiary.
Earlier this year, Loral announced that it was seeking to…
SatelliteFinance understands that Loral Space & Communications is running a parallel process for its satellite manufacturer Space Systems Loral and is considering a full sale of it subsidiary.
Earlier this year, Loral announced that it was seeking to list 19.9% of the satellite manufacturer via an initial public offering and mandated Credit Suisse and JP Morgan to manage the process. However, according to SatelliteFinance sources, the two banks are sounding out potential buyers over a full sale.
One banker argued that given the lack of certainty in the equity markets and SS/L’s cash flow profile, an IPO was somewhat of a ‘red herring’ and that a trade sale was far more likely outcome. The banker added that its cash flow profile would make it a hard deal for sponsors and that he expected the company to go to a trade buyer.
Of the likely strategic candidates, one well placed source argued that Orbital Sciences would seem the most likely fit but would struggle to finance the deal. They added that both Lockheed and General Dynamics are seemingly not interested and Boeing has already been on a spending spree of late, most recently snapping up Argon ST for approximately US$775m.
The source mooted Northrop Grumman as a potential dark horse given its work developing satellites for the US government. Whether it would want to move into the commercial sector, though, is another matter.
Outside of North America, the two big European manufacturers EADS Astrium and Thales Alenia Space are potential candidates but one banker remained sceptical, arguing that while such a deal would be unlikely to face any regulatory hurdles from CIFIUS, they had so far showed very little interest.
SS/L recently reported its second quarter 2010 results and posted a sizeable increase in adjusted EBITDA from US$12.1m in Q2’09 to US$37.1m in 2010. The company said that this was a result of improved factory performance and the effects of the increased volume. Revenue was also slightly up, from US$275.8m in Q2’09 to US$281.2 in Q2’10.
