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GeoEye CEO Prepared to Move Quickly on DigitalGlobe Acquisition

By | May 7, 2012

      [Satellite TODAY Insider 05-05-12] GeoEye has made an offer to acquire its rival satellite imagery company DigitalGlobe for $792.3 million in cash and stocks, GeoEye CEO Matt O’Connell announced during a May 4 conference call.

         The GeoEye proposal would give DigitalGlobe’s shareholders a total consideration of $17 per share in cash and stock — a 26 percent premium compared to the company’s closing stock price on May 3.
         O’Connell said he wrote a letter to DigitalGlobe CEO Jeffrey Tarr on Friday and held discussions recently between the two companies concerning a potential acquisition.
      “We are prepared to move quickly on this,” O’Connell said on the conference call. “Our board of directors would consider restructuring the proposal to increase the purchase price or reduce the cash consideration and increase the stock portion of the offer.
         DigitalGlobe issued its own response statement to the proposal May 4. In it, the company said it would “carefully review and consider GeoEye’s offer to determine the best path for shareholders.”
         O’Connell said the combined GeoEye/DigitalGlobe entity would create the world’s largest fleet of high-resolution commercial imagery satellites and be well positioned to meet U.S. government and other customer needs in a fiscally constrained environment.
         “In the face of significant pressure on the U.S. defense budget and intensifying international competition, a combined company will be better positioned to provide the U.S. government with the time-sensitive geospatial intelligence that is needed to support its mission in a very cost-effective manner during these fiscally conservative times,” said O’Connell. “This proposal delivers exceptional value for the combatant commanders, national decision makers, civil users and disaster relief workers, who have a critical need for unclassified commercial imagery. It also provides benefits for the taxpayer. It offers our Government a way to get the information it needs while still reducing its funding obligations.”
         Some analysts did raise concerns regarding the possibility that DigitalGlobe’s EnhancedView contract would be the victim of federal cutbacks. But DigitalGlobe recently revealed that the contract had been fully funded for the 2012 year during its first quarter financial reports.
         GeoEye also released its 2012 first quarter results. The company reported total revenues of $89.3 million — a 3.1 percent increase from the first quarter of last year. GeoEye’s net income was $13.2 million compared with $10 million in the same period last year.
         The company invested $60.4 million for the continued development and construction of the GeoEye-2 satellite and EnhancedView program during the 2012 first quarter, including $13.3 million of capitalized interest. To date, the company has invested $639.1 million in the GeoEye-2 satellite and EnhancedView program, including $76.4 million of capitalized interest.
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