Wall Street Analysis

By | July 19, 2004 | Feature

By Paul Dykewicz,

Antitrust regulators and a top Wall Street analyst made good calls last week regarding New Skies Satellites N.V. [NSK].

The Blackstone Group, a private investment firm, received early termination of the required waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976. That expedited regulatory action is a positive step in allowing completion of an agreement announced June 6 for Blackstone to buy New Skies. The transaction already has the unanimous approval of New Skies’ supervisory and management boards who will recommend it at an extraordinary general meeting of shareholders today.

Because New Skies is by far the smallest global satellite operator, it poses no antitrust risks. Regulators allowed the transaction and the final vote for shareholder approval to proceed without needless delay.

Tom Watts, a satellite analyst at SG Cowen, last week astutely observed that an “arbitrage” spread of 3 percent exists between the $7.96-per-share price Blackstone agreed to pay for New Skies and the satellite company’s current stock price. In my view, that’s a small arbitrage risk due to the great probability the deal would be approved without trouble by regulators and shareholders. Watts wrote in his research note that he expects that spread to narrow in time because a “high likelihood” exists that it will close by year’s-end.

Watts also is on target when he forecasts that Blackstone likely will use New Skies as a platform to pursue other acquisitions in the future. Blackstone bought a small but good company with a solid cash flow, and it should be able to learn quite a bit in quick order to embolden it to take the plunge of buying another, probably larger, company down the road. A possibility also exists that Blackstone may cash out in several years once the market for satellite operators improves and the value of New Skies would increase.

The expectation from Watts is that the follow-up deal by Blackstone likely would occur after the purchase of New Skies is completed. That seems logical and prudent, since Blackstone still needs to focus on adding whatever value it can to New Skies’ operations.

“In the longer term, [New Skies] could still be a target for a larger player,” Watts predicted.

As always in such deals, certain shareholders question whether a sufficient price was fetched but that kind of second-guessing is an instinctive reaction for investors.

Paul Dykewicz is senior editor and senior analyst of Satellite News. He can be reached at 301/354-1769 or at pdykewicz@accessintel.com.

The Satellite News Financial Ticker

Week of July 9-15, 2004 Percentage Change
Symbol July 15 Price One Week One Month Three Month Year to Date
Operators
APT SATELLITE HLDGS ATS 1.63 (5.8) (9.9) (15.5) (31.5)
ASIASAT TELECOM SAT 16.55 0.1 4.1 (5.2) (12.8)
BRITISH SKY BROADCASTING BSY 45.82 2.3 2.3 (5.9) (10.1)
ECHOSTAR COMM -CL A DISH 29.32 (1.0) (5.8) (12.8) (13.7)
THE DIRECTV GROUP DTV 16.99 (0.9) 0.2 (0.9) 2.7
LORAL SPACE & COMM LOR 0.17 6.3 13.3 (62.2) (46.0)
NEWS CORP NWS 35.03 (1.7) (1.5) (5.3) (3.0)
NEW SKIES SATELLITES NSK 7.73 0.1 0.5 12.7 8.0
PANAMSAT SPOT 23.20 (0.1) 0.2 (9.9) 7.6
PASIFIK SATELIT NUSANTARA PSNRY 0.15 (31.8) (31.8) (31.8) 200.0
PEGASUS COMMUNICATIONS PGTV 25.05 11.3 50.9 (17.1) (10.8)
SES GLOBAL SESF.LU 7.02 0.1 (2.5) (2.5) (12.3)
SIRIUS SATELLITE RADIO SIRI 2.61 (8.4) (19.7) (30.4) (17.4)
XM SATELLITE RADIO XMSR 26.03 (2.6) 8.5 (5.4) (1.0)
Operators’ Average 100.00 (2.3) 0.6 (13.7) 4.3
Manufacturers
ANDREW ANDW 16.40 (9.2) (12.3) (17.7) 41.5
BALL BLL 73.38 1.0 5.9 5.5 23.2
BOEING BA 49.24 (0.3) 0.8 18.5 16.8
COM DEV INTL *CDV 3.28 (7.6) (3.5) 15.1 13.9
EMS TECHNOLOGIES ELMG 15.66 (12.1) (15.4) (19.8) (23.8)
GARMIN GRMN 34.34 (3.3) 4.0 (16.7) (37.0)
GILAT SAT NETWORKS GILTF 4.35 (14.2) (27.6) (48.5) (11.0)
GLOBECOM GCOM 5.60 5.7 8.1 4.1 17.9
HARRIS HRS 47.59 (1.9) 5.2 (1.0) 25.4
HONEYWELL HON 35.71 (0.6) 0.2 3.6 6.8
KVH KVHI 8.96 (9.0) (32.6) (33.7) (67.5)
LOCKHEED MARTIN LMT 53.68 1.2 6.4 14.8 4.4
LUCENT TECHNOLOGIES LU 3.41 (2.3) (20.1) 20.1
MOTOROLA MOT 16.56 (4.7) (12.6) (5.6) 18.3
ORBITAL SCIENCES ORB 13.04 (1.5) 3.8 3.9 8.5
QUALCOMM QCOM 68.88 (3.6) 0.2 2.3 27.7
RAYTHEON RTN 33.37 (3.0) (2.5) 4.9 11.1
ROCKWELL COLLINS COL 34.26 3.7 9.7 5.3 14.1
SCIENTIFIC-ATLANTA SFA 30.14 (5.9) (8.3) (7.7) 10.4
SKY FRAMES SKYU 0.05 400.0 (50.0) (50.0)
TITAN TTN 12.61 7.4 (32.5) (35.3) (42.2)
TRIMBLE NAVIGATION TRMB 23.66 (4.9) (12.4) 0.9 (4.7)
VIASAT VSAT 20.37 (11.9) (11.4) (15.2) 6.4
Manufacturers’ Average 100.00 (3.4) 11.9 (8.4) 1.3
Nasdaq Composite Index
Nasdaq comp 1,912.71 (2.7) (2.9) (5.5) (4.5)
SP 500 sp50 1,106.69 (1.0) (1.7) (1.9) (0.5)
SN Stock Price Average 100.00 (3.0) 7.6 (10.4) 2.4

 

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