Inmarsat rejects activist effort to thwart $6bn takeover
Oaktree accuses UK satellite group of ignoring US spectrum value in deal price
Inmarsat has rejected an eleventh-hour effort to derail its $6bn sale to a private equity consortium in which it was accused of ignoring a potential boost to the company’s value.
Oaktree Capital Management, the fund founded by billionaire Howard Marks, wrote to the British satellite group’s board on Tuesday calling for the postponement of a court hearing next week that would clear the path for the deal.
Oaktree argued that the recommended offer for Inmarsat failed to take account of the potential value of spectrum assets used by Inmarsat’s US partner Ligado.
Ligado emerged from the bankrupt LightSquared, which had planned to build a wireless broadband network using Inmarsat’s spectrum. The plan failed after the US communications regulator suspended its licence in 2012 as its services interfered with GPS signals used in the farming industry.
Oaktree has highlighted a draft order by the US communications regulator to approve a licence modification for Ligado. Citing previous comments by Rupert Pearce, Inmarsat chief executive, Oaktree said the licence change and a reactivation of the Ligado plan could deliver “substantial incremental value” to Inmarsat.
Oaktree owns 2.85 per cent of Inmarsat’s shares and was an investor at the time of the deal, according to a person with direct knowledge of the situation. It said it had expressed its view both to Mr Pearce and UBS, which has acted as an adviser to the consortium comprising Apax and Warburg Pincus.
Oaktree said it had decided to publish its demands after Inmarsat rejected its requests for a private meeting over what it claims is a material change of circumstance.
Kite Lake Capital Management, which has a 3.8 per cent stake in Inmarsat, backed Oaktree’s call to delay the completion of the deal due to the Ligado developments as did Rubric Capital Management, which has a 2.2 per cent stake. Both backed the takeover in a shareholder vote but have called for a pause on the completion “in light of this material new information”.
Inmarsat said there had been “no material change” to its prospects since the bid was lodged as the board viewed a potential move to revive the Ligado wireless plan as “uncertain”.
The person with knowledge of the matter argued that Inmarsat, which cut its dividend the year before to reflect lower payments from the US company, had not kept the Ligado situation secret during the bidding process. Spectrum used by Ligado was also seen as a driver last year for the failed attempt to buy the company by EchoStar, a rival satellite company controlled by billionaire Charlie Ergen.
Oaktree will now appeal to the judge at the court hearing next week.
A move to disrupt the sale based on the draft order on Ligado’s licence would set an “extraordinary precedent”, according to another person with direct knowledge of the situation.
The recommended offer for Inmarsat, made as the stock traded at a 12-year low, was pitched at less than half of its 2016 peak.
The shares rose 1 per cent to 558p on Tuesday, slightly below the US dollar-denominated offer.
The potential value of US spectrum within the satellite industry has been underlined by a sixfold rise in Intelsat’s share price since summer last year, driven by hopes that airwaves it controls in a range known as the C-Band will be repurposed for 5G services.