PA & NSE

Intelsat threw the satellite industry a curveball when it announced that it agreed to acquire Panamsat for $3.2 billion to create the world’s largest Fixed Satellite Services company. The combined company, which will retain the name Intelsat, will operate a fleet of 53 satellites and generate more than $1.9 billion in annual revenue.

Under the agreement, announced Aug. 29, shareholders of Panamsat Holding Corp. will receive $25 per share, nearly 40 percent above the company’s March initial public offering price. Intelsat also will assume $3.2 billion in debt held by Panamsat and its subsidiaries.

Shares of Panamsat, which had been trading just below the $20 per share mark, jumped to $23.80 the day the deal was announced, a $4 increase over the closing price of the previous trading day. Since then, the stock inched closer to the $25 mark, reaching a high of $24.21 Sept. 6, before falling to $24.20 throughout the next two trading days. Barring a cancellation of the deal or some other significant event, we expect the stock price to continue a slow ascent to $25 per share until the deal closes. We don’t expect Panamsat shares it to rise above that point, though prices could exceed that price when you factor in the dividends that will be paid. Panamsat CEO Joseph Wright said during an Aug. 29 conference call with reporters that the company will continue to pay out quarterly dividends equal to $1.55 or more per share on an annual basis until the deal closes.

Shares of New Skies, which had been the subject of multiple Intelsat takeover rumors prior to the announcement of the Panamsat deal, dropped. Intelsat CEO David McGlade said his company opted “for the better deal.”

New Skies shares had been in the mid- to upper-$23.00 range since Aug. 19, reaching as high as $24.16 Aug. 22, when reports of a potential Intelsat deal were at their peak. New Skies shares dropped $2.20 Aug. 29 when the Intelsat/Panamsat deal was announced. New Skies has recovered some of its losses, reaching as high as $22.75 Sept. 2 before dropping back to $22.11 Sept. 8, suggesting that investors remain comfortable with the company’s future prospects.

WRSP

The struggling Worldspace stock is showing signs of a comeback with a little help from respectable quarterly earnings report that saw revenues increase and a shrinking of the company’s net loss.

For the second quarter 2005, Worldspace reported revenues of $2.3 million, a 21 percent increase compared to the $1.9 million in revenues earned in the second quarter 2004.

Subscriber revenues increased 390 percent to $800,000 in the second quarter 2005 from $200,000 in the same period a year ago. As of June 30, Worldspace had 63,930 subscribers to its satellite radio service. The company added 11,427 subscribers during the second quarter 2005, an increase of 93 percent compared to the 5,936 subscribers added in the second quarter 2004.

The satellite radio service provider reported a net loss for the second quarter 2005 of $22 million, compared to a net loss of $52.3 million in the same period a year ago.

The stock had been on a downward spiral since Aug. 16, when shares closed at $19.95. The stock lost more than $4 in the decline, bottoming out at $15.91 Aug. 26. Prices showed some signs of recovery before falling to a historic low of $15.80 Aug. 31. Since then, Worldspace stock has climbed, reaching as high as $18.54 Sept. 7, the day of the earnings release, before falling back to $17.70.

We continue to believe that it will take a few more strong quarters before Worldspace pulls back to its initial public offering price of $21. But this first quarterly result since the stock went public Aug. 4 gives investors something to look forward to.