Despite receiving a number of substantial takeover offers, Telesat has ended its sales process and is now expected to undertake a recapitalisation in order to return funds to its shareholders.
The decision, which Telesat revealed in its second quarter…
Despite receiving a number of substantial takeover offers, Telesat has ended its sales process and is now expected to undertake a recapitalisation in order to return funds to its shareholders.
The decision, which Telesat revealed in its second quarter 2011 results announcement, means that its majority owner Loral Space & Communications will now focus on spinning-off its satellite manufacturer Space Systems Loral. In late 2010, Loral formed a new subsidiary, SS/L Holdings Inc, for the purpose of facilitating an initial public offering, sale or spin-off of SS/L.
Speaking on the results conference call, Dan Goldberg, president and CEO of Telesat, commented: “Our board of directors authorised management to explore an IPO of the company or other strategic alternatives that may arise. Among other initiatives and following expressions of interest from third parties, potential purchasers were invited to participate in a process to explore a potential acquisition of all or a portion of our shareholders interest in Telesat.
“At this point in time, I can share with you that although the process resulted in several offers, none of these offers was ultimately accepted. As a result, discussions with the potential purchasers were terminated. At present, we are continuing to evaluate other alternatives including potential recapitalisation transactions, although there can be no assurance that any such transaction will occur.”
Goldberg would not go into the reasons as to why Telesat decided to terminate the takeover discussions arguing that it was an internal matter, but he did hint that it was likely to do with differences over valuations.
“Given the amount of built in growth we have in the company and just how significantly we have grown the company over the past few years, I thing both shareholders feel like there is still a significant amount of value to be had if we continue to execute our business plans,” Goldberg said.
The list of potential purchasers was dominated by private equity players, with a consortium of Blackstone, KKR and Providence believed to have held discussions. Carlyle is also rumoured to have been in the running, while the sole strategic interest came from Intelsat.
With regard to what strategic alternatives Telesat would now focus on, Goldberg said: “The heavier focus is on the recapitalisation. As far as when we would come to a conclusion in terms of what we are going to do, that is harder to say.”
The company added that depending on timing, it may also consider refinancing a portion of its existing debt as part of the recapitalisation. Goldberg pointed out that since the company put its current financing in place, the EBITDA of the company has nearly doubled, so the balance sheet and cash flow could support incremental borrowings.
Telesat has two pieces of debt maturing in 2012, a C$153m revolving credit facility and a C$200m term loan both due at the end of October. Beyond this, the Canadian satellite operator has a dual-tranche US$1.9bn term loan facility due in October 2014, US$693m of 11% senior notes due November 2015 and US$217.2m of 12.5% senior subordinated notes due November 2017.
Credit Suisse and JP Morgan are understood to be advising both Loral and Telesat on the process.
