Machine-to-machine satellite operator Orbcomm plans to acquire Canadian service provider SkyWave for US$130m to become the largest global space-based M2M communications company.
SkyWave is the biggest M2M service provider on Inmarsat’s L-band network…
Machine-to-machine satellite operator Orbcomm plans to acquire Canadian service provider SkyWave for US$130m to become the largest global space-based M2M communications company.
SkyWave is the biggest M2M service provider on Inmarsat’s L-band network with more than 250,000 subscriber units, and the deal marks the second phase of a partnership it announced with the British MSS operator in November last year.
It will see US-based Orbcomm enter new geographies in Eastern Europe and Asia as well as diverse vertical markets such as security and marine. The acquisition also gives the company access to higher bandwidth, low latency satellite products and services to widen its own portfolio.
“By combining our complementary products, distribution channels and broad geographic footprints – with support from Inmarsat – we are adding significant scale to our business,” said Orbcomm CEO Marc Eisenberg.
“Our customers will benefit from access to one of the industry’s broadest set of complete solutions, global regulatory authorisations and satellite-based connectivity options.”
Orbcomm is paying US$122.5m of the consideration in cash and US$7.5m through a promissory note to Inmarsat to help buy its 19% stake in SkyWave. Inmarsat expects total proceeds of US$32.2m from selling its stake in the group.
Separately, Inmarsat is spending around US$7.5m to acquire and operate SkyWave’s satellite network assets that are located primarily at three of its Earth stations in the Netherlands, Canada and New Zealand. Orbcomm and Inmarsat will also jointly own its IsatDataPro communications technology, which the latter will offer through its reseller channel.
The M2M operator is funding its acquisition through a combination of existing cash on its balance sheet, a public offering of common stock that aims to raise around US$72m, and additional borrowings under a US$160m loan facility it secured last month from Macquarie.
The boards of both companies have approved the transaction and expect to close it early next year following regulatory approvals.
Raymond James served as financial adviser to Orbcomm on the deal, and is an underwriter on its planned stock offering along with Canaccord Genuity and Macquarie.
McCarthy Tétrault served as Canadian legal counsel, and Milbank, Tweed, Hadley & McCloy served as US legal counsel for its acquisition.
Skywave posted US$60m in estimated annualised revenues and over US$12m in adjusted EBITDA.
The deal comes a year after Inmarsat struck an M2M alliance to use Orbcomm’s technology, forging a standardised platform to create chipsets at lower price points.
It is also the latest in a series of bolt-on acquisitions that Orbcomm has made over the past couple of years as part of a build, buy or partner strategy to help consolidate the M2M distributor market. In March the group snapped up Dutch transportation temperature monitoring firm Euroscan in a US$29m deal, and in late 2013 it bought the asset tracking operations of communications developer Comtech.
Orbcomm said it expects to report US$15.2m in service revenues in its upcoming Q3 results, compared with US$13.7m for the corresponding period last year. However, it expects to report US$3.7m in adjusted EBITDA, compared with US$4.3m in Q3 2013.
