Wall Street Analysis
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 [email protected].
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 |