NSE

In what could be a significant story that likely would not shock anyone in the satellite industry, Intelsat reportedly is in negotiations to purchase New Skies Satellites Holdings Ltd.

According to an Aug. 19 report in the Wall Street Journal, sources familiar with the matter said negotiations have been ongoing for weeks about an Intelsat purchase of New Skies for as much as $1.3 billion.

Rumors of the two companies joining forces have been around for some time but gained additional momentum earlier this year when hypothetical merger talks between Intelsat and New Skies dominated an April Congressional hearing on the Open-Market Reorganization for the Betterment of International Telecommunications (ORBIT) Act (SN, April 18). In July, restrictions that would have prevented Intelsat and New Skies from entering into a merger/acquisition transaction were lifted by the U.S. government (SN, July 18).

New Skies would neither confirm nor deny whether the talks were even taking place. According to a statement issued by the company, “Our policy is not to comment on strategic activities before they reach the stage where disclosure is required. This of course neither means that there are any ongoing discussions nor does it mean that there are not any discussions, only that we do not make any comment on such matters.”

An Intelsat spokesperson could not be reached as this article went to press.

In an Aug. 19 research report, Vijay Jayant, analyst with Lehman Brothers, said “We continue to believe that the Fixed Satellite Services industry has the potential for consolidation and that an Intelsat-New Skies transaction would make strategic and economic sense for both partners.” Combining Intelsat and New Skies could result in material cost savings of $40 million a year or more, according to Lehman Brothers estimates.

In addition, such a transaction could provide an exit point for New Skies’ private equity controlling stakeholders,” Blackstone Group,Jayant said. Blackstone purchased New Skies in June 2004 for $956 million in cash (SN, June 14, 2004).

Jayant said the $1.3 billion price implies a per share price of $25, and the stock price was climbing toward that figure as this issue went to press. At 10:30 a.m. EDT Aug. 19, New Skies stock was trading at $23.50, gaining $3 from its previous day’s closing.

If the deal were to go through, the combined Intelsat-New Skies entity would nearly match SES Global in the number of satellites operated. SES Global currently has 35 satellites in its fleet, compared to the 34 the merged Intelsat-New Skies fleet would operate. SES shares on the Luxembourg Stock Exchange have not yet reacted to news of the potential merger, closing Aug. 19 at the same price it closed at Aug. 18, 13.25 euros ($16.09).

SGB & ISAT.L

The announced acquisition of Xantic B.V. by Stratos Global Corp. (see related story, p. 1) had an immediate effect on Stratos’ shares on the Toronto Stock Exchange. The stock jumped nearly Cdn. $1 (82 cents), closing Aug. 15 (the day the acquisition was announced) at Cdn. $8.44 ($6.94), compared to Cdn. $7.47 ($6.14) closing price Aug. 12. This was the first time the stock traded about Cdn. $8 ($6.58) since July 11. The stock continued its climb Aug. 16, closing at Cdn. $8.80 ($7.23) but gave back much of those gains by Aug. 18, when the stock closed at Cdn. $8.25 ($6.78), suggesting that the euphoria of Stratos becoming the largest Inmarsat reseller wore off rather quickly.

With no other news coming from the Inmarsat camp this week, its stock dropped a bit. The company’s shares, traded on the London Stock Exchange, took a small hit Aug. 15, dropping to 3.20 pounds ($5.73) from 3.25 pounds ($5.82). The stock climbed a bit during the next two trading days before closing Aug. 18 at 3.195 pounds ($5.73), suggesting that perhaps investors are not as keen to see consolidation in the Inmarsat reseller market as the resellers themselves — or simply did not care.

WRSP

Shares of Worldspace Inc. have yet to recover to their initial public offering (IPO) price of $21, hovering around the high $19-low $20 range. We would not take this as an initial cause for alarm. Following its IPO, Panamsat traded below its offer price for a nearly two months before it finally began trading above its IPO price of $18. However, the future of Panamsat is a bit more predictable, and uncertainty surrounding the market for satellite radio outside of the United States could keep Worldspace’s per share price down until the company demonstrates solid financial performance on its quarterly reports.