Stratos Acquires Euro VSAT Business, Eyes Others

Stratos Global Corp. executed a definitive agreement to acquire 100 percent of Plenexis from private equity and venture capital company 3i. Stratos also announced the acquisition of a 49 percent stake in Navarino Telecom SA and NTS Maritime (collectively referred to as Navarino), Stratos’ largest maritime dealer, with an option to acquire the remaining interest in this dealer. Financial terms for either deal were not disclosed.

The company also announced its board of directors has authorized an offer to purchase up to 15 percent of its common stock through a Dutch auction tender offer. The offer, which represents 7.4 million of the company’s 49.4 million outstanding shares will be made at a purchase price of not less than Cdn. $10.75 (U.S. $8.95) and not more than Cdn. $12.00 (U.S. $9.99) per common share, representing a premium of up to 12 percent above the Jan. 12 closing price.

The transactions will be financed with cash on hand, as well as through the issuance of a new five-year U.S. $25 million incremental credit facility under Stratos’ existing credit agreement.

Doug Gunster, spokesman for Stratos, told Satellite News that the more significant deal was the Plenexis deal.

Plenexis is a VSAT services provider in Europe, Gunster said. He noted that Stratos’ VSAT business is primarily located in the United States and the United Kingdom, so acquiring Plenexis broadens Stratos’ geographic presence.

Acquiring Plenexis also doubles the size of Stratos’ VSAT business. “This acquisition allows up to increase the scale of our VSAT business,” he said. “In other words, we have more customers and more revenues. The acquisition increases our purchasing power with regard to the space segment.” Gunster would not say how many VSAT customers had before or after the acquisition, but he said Plenexis earned about $40 million in revenues in 2004, which is roughly what Stratos earned during that same period.

Gunster said the fate of the Plenexis name is still up in the air following the acquisition, Gunster said, but he noted that the company will not operate as a wholly owned subsidiary and its operations and financials will be folded into Stratos. “With regard to marketing in terms of names, that is something we will work on during the integration period throughout the next couple of months. We’ll look at the [strength of Plenexis as a brand name and decide what makes the most sense.”

The Navarino Deal

“We took a 49 percent stake in Navarino, our largest distributor in the maritime market. The strategy is we’ve had a long-term relationship with this distributor and we are just strengthening that relationship,” Gunster said. “The advantage of [acquiring that stake] is that it guarantees that Naravino will continue to do business through us as one of our distributors with regard to Inmarsat and Iridium satellite services.”

Stratos will have the option going forward to acquire the rest of the ownership interest in Naravino “if the current majority owners decide they don’t want to be owners anymore,” Gunster said. “We have the option to step in and make an offer to control that important distribution channel as opposed to it being open to competitors.”

Future Acquisitions

Gunster said the company is on the lookout for more acquisition targets.

“We have for the past year or so been focused pretty aggressively on growth through acquisition and we are going to continue to focus on it,” he said. “We don’t have any specific opportunities that we can talk about right now, but it continues to be one of our primary strategic objectives.”

He continued, “We think both in the mobile satellite services and on the VSAT side, there are opportunities to consolidate the industry a little bit more and from a financial perspective, we feel we are well positioned to do that. They may be smaller acquisitions or they could be larger depending on what opportunities are there.”

(Doug Gunster, Stratos, 301/968-1954)