NSE

The biggest news in the satellite industry last week was the Dec. 14 announcement that SES Global S.A. will acquire New Skies Satellite Holdings Ltd. for $760 million in cash plus the assumption of debt.

What is a bit out of the ordinary for this transaction is that the per share price to be paid by SES Global is lower than the Dec. 13 closing price of New Skies stock. SES Global agreed to pay $22.52, a 4 percent discount from the $23.50 closing price the day before the news of the acquisition agreement broke. The companies noted in a release announcing the deal that the price offered to New Skies shareholders represents a 10 percent premium on the closing price Aug. 18, when news that a deal was imminent gained significant momentum. The offer price also represents a 36 percent premium over the New Skies initial public offering price of $16.50. New Skies went public May 10.

In a Dec. 14 conference call with investors, New Skies CEO Daniel Goldberg suggested that the company’s shares might have been overvalued.

“Just looking at the trading history of the shares, the share price very much has been buoyed by all the speculation in the press about the company [and] a meaningful component of our share price already reflected a deal premium,” Goldberg told investors in response to questions of why a deal was accepted that represented a discount to the current trading prices. He added that New Skies spoke “to every conceivable would-be acquirer. In having done so, this was in the board’s unanimous opinion the most attractive offer to the company from both a value perspective and a certainty perspective.”

In a Dec. 14 equity research note, Vijay Jayant, analyst with Lehman Brothers, said “The $22.52 price is consistent with our stand alone valuation on New Skies and implies SES is valuing New Skies on a going concern basis and not giving valuation consideration for merger synergies to New Skies shareholders.”

As to be expected, New Skies shares dropped with news of the merger deal to a level below the SES offer. Shares closed Dec. 14 at $22.05 and closed two cents higher the following trading day. With a firm acquisition price established, we expect New Skies shares to remain flat until the transaction is closed, which is expected to take about six months, Goldberg said.

XSR.SV & XMSR

Canadian Satellite Radio Holdings Inc. (CSR), which offers satellite radio service in Canada under the XM Canada brand, completed its Cdn. $55 million ($47.6 million) initial public offering of stock Dec. 12. Shares, traded on the Toronto Stock Exchange under the symbol XSR.SV, were valued at Cdn. $16 ($13.85) and have traded below the IPO price since hitting the market. The stock bottomed out at Cdn. $13.45 ($11.64) Dec. 13, then closed up on the two subsequent trading days, ending Dec. 15 at Cdn. 14.95 ($12.94).

Typically, financial analysts do not release reports on a stock until it has been trading for an extended period, so perspective on CSR’s performance is not yet available. However, as a point of comparison, shares of XM Satellite Radio, CSR’s U.S. satellite radio partner, gained about $1 throughout the past four days, closing Dec. 12 and Dec. 15 at $29.96 and $30.95, respectively, hinting that the performance of the two stocks will not necessarily mirror each other.