Inmarsat Targeted Again for Acquisition Deal

Inmarsat’s London Headquarters. Photo: Inmarsat

Another set of companies has submitted a proposal in an attempt to acquire Inmarsat. It was confirmed late last night that Inmarsat has received a non-binding proposal from Apax Partners, Warburg Pincus International, and Canada Pension Plan Investment Board (CPPIB) regarding a possible cash offer of $7.21 per Inmarsat share for the entire issued, and to be issued, share capital of Inmarsat. While the interest of this consortium may or may not lead to a deal, the proposal remains “under discussion.”

The proposal assumed no further dividends would be paid by Inmarsat following the date of the proposal. Apax, Warburg Pincus, and CPPIB subsequently confirmed that Ontario Teachers’ Pension Plan Board (OTPP and together with Apax, Warburg Pincus and CPPIB, the Consortium) would also be supporting the proposal as part of the Consortium.

Inmarsat has long been of interest to others in the sector. Recently, EchoStar made a bold move to acquire the company — and was rejected. However, it appears as though the stakes have been raised. Roshit Ranjit, a satellite equity analyst at Deutsche Bank, said in a research note issued this morning, “Last year the Inmarsat board received a proposal from EchoStar for a cash-and-share offer equivalent to 532p per Inmarsat share. This was rejected by the Inmarsat board as they regarded it as undervaluing the opportunity. At the time the board said it ‘remains highly confident in the independent strategy and prospects of Inmarsat, given our track record, unique capabilities, differentiated market position, and strong channels to market’. We would highlight recent Inmarsat results where the Aviation segment continues to gain momentum delivering high-margin airtime service revenues.”

Aviation has long been a major target for Inmarsat, and  a highlight of its recent results. In a bullish prediction in late 2017, Inmarsat Chief Executive Officer (CEO) Rupert Pearce told Via Satellite, “From this diversified position, we can achieve many more shots on goal than we did a decade ago, and aviation passenger connectivity is a classic example of that. It could be a billion-dollar revenue stream for us in a decade or more, if we are successful, and if the market grows the way commentators think it will do.”

It is particularly significant that Apax Partners is involved again. Ranjit highlights the fact that Apax Partners were part of the consortium involved in Inmarsat’s 2005 Initial Public Offering (IPO), having previously bought a majority stake in 2003 and would therefore know the asset well. “As a whole, we have seen recent interest from private equity and infrastructure funds in the wider telecoms sector, particularly tower and fiber assets. We see good visibility in Inmarsat’s cash flows, particularly with Inmarsat now guiding to a falling capex trend, as well as long-term sticky contracts given the Aviation backlog with more than 3,000 aircraft under Request for Proposal (RFP),” he said.

Inmarsat said in a press statement that there can be no certainty as to the terms on which any offer would be made, and that it isn’t certain that the discussions will lead to any firm offer. This story is set to continue over the next few months.