By Justin George Varghese
(Reuters) - A private equity-led consortium agreed to buy Inmarsat Plc for about $3.4 billion in cash after the British satellite operator rebuffed a slightly lower bid from U.S. rival EchoStar last year.
The consortium, which includes UK-based Apax Partners, U.S.-based Warburg Pincus and two Canadian pension funds, is betting in part on Inmarsat's reputation for selling faster and more reliable in-flight Wi-Fi to commercial airlines worldwide.
Inmarsat shareholders will get $7.21 cash, or 546 pence per share. Inmarsat's shares were up 8.9 percent at 551 pence by 1422 GMT, higher than the offer price.
The company was the first international satellite operator to be privatized, and Apax was part of the group that invested in 2003, before taking it public two years later.
Inmarsat does not expect regulators to pose major hurdles to the takeover, given its experience with regulators in the United States and Britain, a company spokesman said.
The offer comprises cash of $7.09 for each share plus a previously agreed final dividend of $0.12 per share. That represents a nearly 45 percent premium to Inmarsat's close on Feb. 27, the day before media reports said EchoStar was expected to renew its interest in the company.
TOP SHAREHOLDER SUPPORT
The consortium said it received support from Inmarsat's top shareholder Lansdowne Partners, which holds about an 11.4 percent stake in the company.
The consortium's approach, which was made on Jan. 31 but disclosed only last week, comes after Inmarsat rebuffed a $3.25 billion cash and stock bid from EchoStar last summer.
"While (the consortium) could add further debt leverage in private hands it is much more likely that they will look to find cost synergies in their many investments that they already have in the sector, such as Intelsat, Bharti Telemedia and Arqiva," said James Congdon, Head of Quest, a division of Canaccord Genuity.
"This should help to remove the problem of increased capital intensity that has afflicted Inmarsat over the last few years and allow it generate free cash flow again for its new owners," Congdon added.
Colorado-based EchoStar, chaired by billionaire entrepreneur Charlie Ergen, proposed a cash and stock offer which valued Inmarsat at about 532 pence-a-share at the time, which Inmarsat argued it "very significantly undervalued" the company. EchoStar dropped the bid last July.
Inmarsat said its directors consider the terms of the latest deal to be "fair and reasonable" and intends to unanimously recommend that shareholders vote in favor of the deal.
COUNTERBID SEEN AS UNLIKELY
The consortium said that it intended to maintain Inmarsat's headquarters in the United Kingdom.
According to UK takeover rules, Echostar or another group could still make a rival offer.
France's Eutelsat Communications had said it was considering an offer for Inmarsat last June but ruled itself out of a bid battle with EchoStar less than a day later.
"I think an all cash counter bid above the agreed $7.21 a share is unlikely," Congdon said.
"The consortium has the likely advantage of costs synergies and paying in cash.. Most listed satellite operators today are heavily leveraged and would likely need to issue equity and pay Inmarsat shareholders mostly in shares rather than cash," Congdon added.