Inmarsat in $3.3bn buyout bid from private equity-led consortium

20 March 2019 | Jason McGee-Abe

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Inmarsat has confirmed that it is in discussions over a $3.3 billion takeover bid from a private equity-led consortium.

The news, which broke yesterday and saw share prices rise as a result, comes nine months after the British satellite communications company turned down a £3.2 billion bid from EchoStar.

Inmarsat confirmed last night that it was considering the bid from a group of investors, led by private equity firms: Apax Partners LLP, which majority-owned the business alongside Permira before floating it in 2005, and Warburg Pincus International LLC.

“The Board of Inmarsat confirms that on 31 January 2019 it received a non-binding proposal from Apax Partners LLP, Warburg Pincus International LLC, and Canada Pension Plan Investment Board regarding a possible cash offer of $7.21 per Inmarsat share for the entire issued, and to be issued, share capital of Inmarsat,” said a company statement. After this date, the Ontario Teachers' Pension Plan Board joined the consortium supporting the original proposal, which would value the company at around $3.3 billion.

Inmarsat has attracted acquisition interest from two companies over the past year. In May 2018, Inmarsat rejected a £3.2 billion bid from EchoStar of the US and a month later Eutelsat confirmed that it was “evaluating a possible offer for Inmarsat”, but the potential suitor then stated that it was not going to bid in June 2018.

Inmarsat has not made the terms of the potential offer public. Inmarsat said that the proposal remains under discussion and as such, “there can be no certainty as to the terms on which any offer would be made. Nor is it certain that the discussions will lead to any firm offer for the company”.

Despite this, the countdown has started as the consortium is now required under UK Takeover Panel rules to announce its formal intention in 28 days to acquire, or indeed abandon the proposal, by 5:00pm (UK time) on 16 April 2019.

Inmarsat, which also recently announced it had teamed up with Microsoft to enable global access to its Azure IoT cloud services via satellite connectivity, added that a further announcement will be made in due course.

Earlier this month the London-headquartered company reported published its full year results. Inmarsat stated it had increased group revenue by 5.3% to $1.46 billion last year, aided by strong in-flight connectivity (IFC) performance, which saw a 40.9% increase in revenues from 2017 to 2018.

“Inmarsat delivered consistent growth in 2018, building on our return to growth established in 2017. I am particularly pleased by the 85% revenue growth in GX services and a doubling of our IFC revenues, both of which augur well for the future,” said CEO Rupert Pearce, commenting on the result. Capacity interviewed Pearce last year and he highlighted Inmarsat was targeting US telecoms operators in order to launch IFC services in the region.

"We remain focused on building and defending substantial market share in our target markets, supported by our diversified product portfolio and leading-edge networks. This will ensure we are able to fully capitalise on both the immediate and longer-term growth opportunities in these markets.

"Supported by a tightly controlled cost base and an infrastructure capital investment programme which we are confident will meaningfully and sustainably moderate from 2021, we expect to generate sustained free cash flow growth over the medium to long-term."

It’s a fascinating time for the satellite communications industry, which has seen recent announcements include: