Blog Coverage Intelsat and OneWeb Announce Conditional Merger Backed by Softbank's $1.7 Billion Investment
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LONDON, UK / ACCESSWIRE / March 1, 2017 / Active Wall St. blog coverage looks at the headline from satellite operator Intelsat S.A. (NYSE: I) as the Company and satellite Company OneWeb on February 28, 2017, announced that they have both signed a conditional agreement to merge in a "share-for-share" exchange transaction. In parallel, Intelsat has signed an agreement with Japan's SoftBank Group Corp. (SoftBank) wherein SoftBank will invest $1.7 billion to buy shares of the merged entity. Register with us now for your free membership and blog access at:
One of Intelsat's competitors within the Diversified Communication Services space, Gogo Inc. (NASDAQ: GOGO), reported its financial results for Q4 and full year 2016 on February 27, 2017. AWS will be initiating a research report on Gogo in the coming days.
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The merger of Intelsat and OneWeb would consolidate two of the biggest players in the satellite business and create a financially strong and agile Company which would meet the growing global demand for broadband connectivity. Interestingly both Intelsat and Softbank are investors in OneWeb. Intelsat was one of the founding investors of OneWeb, and SoftBank had committed to invest $1 billion in December 2016 for technological development and to build OneWeb's satellite production facility.
Commenting on the deal, Stephen Spengler, CEO of Intelsat said:
"The transaction, including SoftBank's investment, will significantly strengthen Intelsat's capital structure and accelerate our ability to unlock new applications, such as connected vehicles, as well as advanced services for our existing customers in the enterprise, wireless infrastructure, mobility, media, and government sectors, while also reducing execution and other risks."
Greg Wyler, Founder and Executive Chairman of OneWeb added:
"With SoftBank's support we will build the world's first truly global broadband Company, accelerating our mission of bridging the digital divide by connecting the four billion people without access today."
Masayoshi Son, Chairman and CEO of SoftBank said:
"We are in the midst of a technological revolution and, provided we receive the necessary cooperation from Intelsat bondholders, we welcome the opportunity to support OneWeb as it creates the foundation for next-generation global internet services anywhere on the planet."
Details for the merger and Investment from SoftBank
The finalization of the merger as well as the investment from SoftBank is entirely dependent on the finalizing of debt exchange offers with certain bondholders of Intelsat. The merger is also subject to regulatory approvals and completion of closing conditions. In the event the debt exchange offers are accepted; the debt exchange offers plus SoftBank's investment will enable Intelsat to reduce its existing debt by $ 3.6 billion. In the event that the debt exchange offers are not accepted by the bondholders within 90 days of the agreement, Intelsat and OneWeb have the option to terminate the agreement and SoftBank will also have the option to withdraw its investment offer. If all the above conditions are met, the transaction is expected to be completed by Q3 2017.
If the merger goes through, OneWeb's shareholders will receive Intelsat's common shares for each of their OneWeb's shares. Intelsat's shareholders will continue to hold their common shares. Intelsat plans to issue approximately 800 million shares (a combination of common shares and preferred shares) for OneWeb and Softbank as a part of the merger.
On completion of the merger, SoftBank will receive common shares in the merged entity which translates to approximately 39.9% voting stake and non-voting preference shares against its $1.7 billion cash investment. Any common share bought by SoftBank in the merged entity will be for $5.00 per share. Softbank plans to then transfer these shares to the Softbank Vision Fund, a $100 billion pool that will target technology investments.
The merged entity will be listed on the New York Stock Exchange and will be headquartered in Luxembourg. The new entity will continue to maintain its presence in the US along with OneWeb's manufacturing facility at Exploration Park, Florida, and Intelsat's facilities in McLean, Virginia. Intelsat's Stephen Spengler would be the new CEO, and OneWeb's Greg Wyler would be Chairman of the Board of Directors of the merged Company. The new Board will have seven members of which three will be independent members, three members will be selected by SoftBank and one member will be selected by the current Intelsat's shareholders.
Benefits of the merger
The deal would be financially beneficial for Intelsat as it would be able to reduce its debt and improve its capital structure. The merger will offer further opportunities to reduce costs by way of cost synergies and improved revenues.
The merged entity will be able to offer a combination of OneWeb's low earth orbit ("LEO") satellites and Intelsat's geostationary orbit ("GEO") satellites, which would put both companies' growth plans on a fast track. Intelsat's integrated Ku-band infrastructure when incorporated with the merged Company's managed services will have the potential to support the development of mass-market applications like consumer broadband, connected cars, cellular backhaul, the Internet of Things, and machine-to-machine communications.
The merged entity will be able to offer advanced services to its existing customers in the enterprise, wireless infrastructure, mobility, media, and government sectors.
SoftBank will be able to complement its other investments in the Telecom sector like acquisition of Sprint Corp. in the US and fulfil its pledge to invest $50 billion in the US markets.
Stock Performance
On Tuesday, February 28, 2017, the stock closed the trading session at $4.98, declining by 15.16% from its previous closing price of $5.87. A total volume of 6.88 million shares have exchanged hands, which was higher than the 3-month average volume of 457.39 thousand shares. Intelsat's stock price rallied 48.66% in the last month, 31.75% in the past three months, and 189.53% in the previous twelve months. Furthermore, on a year-to-date basis, the stock skyrocketed 86.52%. Additionally, the stock currently has a market cap of $511.99 million.
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