New Skies CEO: “Business As Usual”

New Skies Satellites [NSK] CEO Dan Goldberg fully expects the company’s management team to remain in place after the company’s announcement of its sale last week. His comments came in the wake of news that the affiliates of the Blackstone Group, a leading private-equity firm, will acquire New Skies for $956 million in cash — or the equivalent of $7.96 per fully diluted share.

In an exclusive interview, Goldberg told Satellite News, “We have always been very disciplined in how we manage the company, so it will be pretty much business as usual. We still operate in the same commercial environment and, as a result, we will confront the same challenges and opportunities we confront as a public company. Suffice it to say, we will remain extremely focused on executing on our strategy.”

He continued, “Additionally, we will continue to be a Dutch company. It is my intention, and the intention of the rest of senior management, to stay here and work with Blackstone going forward. I think that they believe that we have a good, sound business plan.”

The deal was announced June 6, ending weeks of speculation. It also follows similar deals in recent months where private-equity firms heavily invested in the satellite sector. PanAmSat [SPOT] was acquired by affiliates of Kohlberg Kravis Roberts & Co (KKR) in April in a deal worth $4.3 billion. Goldberg believes this trend of financial investors entering the satellite industry is positive. He explained, “These are investors who are very well-informed. They will be very focused owners, and I think that is a good thing. They will bring a high degree of discipline and a strong commercial focus and approach to the industry. I think having private equity investors in the industry will, on balance, be a real benefit.”

So, what were the reasons that New Skies looked to pursue a deal here? Ironically, when Satellite News spoke to Goldberg recently, he forecasted 2004 would be the year of “ownership rotation” in the satellite industry. Goldberg believes these recent trends encouraged the operator in that direction. He said, “Increasingly, with all the activity in our sector, particularly with the private-equity community, we were approached over time by a significant number of our shareholders encouraging us to consider a similar alternative for New Skies. Many of these shareholders were themselves shareholders in companies like Inmarsat or Eutelsat and have first-hand experience in transactions like that. Others saw the PanAmSat deal, and what was regarded as a good valuation achieved in the process, and thought, because of that, this would be a good alternative for us.”

In terms of the timeline of the deal, Goldberg said, “We were speaking to a number of private equity firms in connection with the PanAmSat process, so we started having those conversations back in February.”

The deal may not be the last in terms of financial investors entering the satellite arena. According to Goldberg, “There are only a limited number of satellite operators. Already Eutelsat, Inmarsat, PanAmSat and New Skies have attracted private-equity investment, so there are not many left.”

Intelsat appears to be the next most likely candidate to follow suit.

Goldberg also believes that the deal was done at a price that offered great value to New Skies’ shareholders. He commented, “We are not just pleased that Blackstone ultimately prevailed in the process, but that the process itself has yielded what we think is a very good and attractive price for our shareholders. By our calculations, using our financial performance over the last 12 months, we have achieved a multiple of 7.6 times EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). Based on the analysis that our banks have done, that is somewhat better than the other transactions that have taken place recently, including the PanAmSat and Inmarsat transactions, as well as the transaction where Intelsat acquired the U.S. satellite assets of Loral. We are very pleased about that.”

Numerous Benefits

The deal also could offer New Skies a number of benefits. The Blackstone Group is a major investor in the telecom and media sectors, and Goldberg admits New Skies could benefit from Blackstone’s presence in some of its natural consumer areas. He said, “Blackstone, having studied this industry, understands the changing dynamics that the sector is undergoing right now, and it will be useful to have them as a partner as these dynamics unfold.”

As well as benefiting from Blackstone’s position in other sectors, it could also strengthen New Skies position if it was to look at future acquisitions. Goldberg said, “I think we are in a stronger position to pursue acquisitions because Blackstone has significant financial resources and, obviously, a great deal of experience in making acquisitions. Blackstone has made an investment here because they believe it is a solid investment and they will achieve a good return. If we identify acquisition opportunities and persuade ourselves, and them, that it is a good way to create value, it is my expectation that it will be something they will be open to.”

In terms of how further consolidation in the satellite industry will play out, Goldberg commented, “I do believe that over time — and I am anticipating that time will be between 24 and 36 months — there will be further consolidation in the sector, and for good reasons. There is still overcapacity in most markets, and one can achieve economies of scale in our sector.”

–Mark Holmes

(Elizabeth Hess, New Skies Satellites, e-mail: [email protected])