By Nick Mitsis and Mark Holmes
The year 2005 certainly was a busy year for investors with five satellite operators - Panamsat, New Skies, Inmarsat, Worldspace and Eutelsat - launching initial public offerings (IPO). Most analysts believe that the demand for satellite communication will continue to grow, particularly as service costs continue to fall, which is expected to bring even more attention to these public companies. The newly public companies made strong debuts in 2005, and the stage is set for active growth within the global satellite services sector, making 2006 and beyond worth watching.
Panamsat Holding Corp.
Panamsat was the first major satellite operator to launch an IPO in 2005. The company set an IPO price of $18 and bounced back from an early decline to close Dec. 30 at $24.50.
Even with the solid year-end performance, Panamsat had a challenging start, as the stock did not take off as many had hoped in the first weeks following the IPO. The stock hit Wall Street March 17 and suffered through a slow decline in its first weeks, hovering between $17 and $18 per share, with a slight dip to $16.55 and $16.98 through the beginning of April.
Panamsat's stock will not be on the market much longer, as Intelsat Ltd. announced Aug. 29 that it signed a definitive merger agreement to acquire Panamsat for $25 per share in cash, or $3.2 billion. The Intelsat-Panamsat merger took its first step toward completion when Panamsat shareholders approved the deal, Intelsat CEO David McGlade said during a Nov. 10 conference call with investors.
That Panamsat shareholders approved the deal should not have been a surprise, given that investors stand to receive $25 per share, a premium of 26 percent over the share price the day the merger was announced and a 39 percent share price over Panamsat's $18 initial public offering. The per share price, which stood at $24.50 Dec. 30, should inch closer to $25 over the next few months as the deal approaches completion.
As we went to press, the deal was still pending regulatory approval. Once completed, the new Intelsat-Panamsat will become the largest global satellite operator, using a combined fleet of 53 satellites, the company will serve customers in more than 220 countries and territories.
New Skies Satellites Holdings Ltd.
New Skies Satellites was the second to market, launching trading May 10. The fifth largest satellite operator has never fallen below its IPO price of $16.50.
New Skies was considered one of the more attractive companies to be acquired in an expected industry consolidation, and after flirting with many suitors, New Skies agreed Dec. 14 to be acquired by SES Global for $760 million in cash, subject to various approvals. SES also will assume $400 million of New Skies debt, giving the deal a total value of $1.16 billion.
New Skies shares closed at $23.50 Dec. 13, the day before SES announced it would pay $22.52 per share for the satellite operator. New Skies stock then fell to $21.77 Dec. 30 and, like Panamsat, likely will not see any significant movement until the acquisition nears completion.
SES Global will re-finance the existing bank debt of New Skies and may leave the Floating Rate Senior Notes and Senior Subordinated Notes of New Skies outstanding. As part of the agreement, New Skies has agreed to terminate its quarterly dividend program after the declaration and payment of its 2005 fourth quarter dividend.
The integration of New Skies' satellite assets will extend SES' presence in India, the Middle East and Africa as well as in Latin America. As we went to press, the deal was still pending regulatory approval. Once completed, the new SES Global-New Skies will become the second largest global satellite operator, using a combined fleet of 45 in-orbit satellites.