Oaktree attempts to stall $6bn Inmarsat deal
Oaktree Capital, a hedge fund backed shareholder in Inmarsat, is launching a legal challenge against the buyout group set to by the satellite company for approximately $6 billion.
Announced back in March, the private equity-led consortium made up of Warburg Pincus, Apax, Canada Pension Plan and Ontario Teachers’ Pension, known as Connect, was agreed at a price of $7.21 per share, valuing the company at around $6 billion.
Top shareholder Oaktree Capital is due to go to the High Court later this week to ask the judge to issue the scheme of arrangement in order to increase the $7.21 share price and trigger a new shareholder vote.
According to the Telegraph, which first reported the story, Oaktree believes that the deal it worth more than its current $6 billion price tag due to a lucrative spectrum licencing agreement Inmarsat has with US satellite communications company, Ligado. Under the agreement between the two, Ligado will use the part of the spectrum of radio frequencies it leases from Inmarsat to create a wireless network across the US, which in turn will accelerate the development of high speed 5G connectivity.
The challenge put forward by Oaktree has come under scrutiny however, because in order to deliver this wireless network, Ligado will need a change in its license from the Federal Communication Commission (FCC).
Rachelle Chong, a former FCC commissioner and lawyer spoke as an expert witness for Inmarsat and in the in High Court filings is quoted as saying: “It is pure speculation to opine that an FCC decision on the Ligado application is close to being made.” Adding that Ligado’s plans were recently rejected by the US Secretary of Defence Mark Esper, on the grounds that Ligado’s new network could disrupt US military GPS systems.
Additionally, those close to the matter have said even should the deal be approved, it would be a long while before Inmarsat would see a return on those investments.
Connect’s agreement to buy Inmarsat is due to expire on 10 December and has already officially refused to increase its offer or extend the deal for a shareholder vote. It is expected that should Oaktree’s High Court challenge go through; the consortium will likely walk away.