Why is Inmarsat so keen on $3.4bn deal? It’s not rocket science
All-cash nature of bid adds up for satellite company
Explaining what you do for a living is a pleasure to some, a chore to others. A brain surgeon in a Mitchell & Webb comedy sketch from a few years back fell squarely into former category, given the number of times he dismissed party guests’ professions as being “not exactly brain surgery” . . . until Geoff from the “space centre” introduced himself: “I’m a scientist. I work mainly with rockets . . . ”. However, the directors of London-listed satellite group Inmarsat would appear to fall into the latter category: somewhat reluctant rocket scientists.
News that they are recommending a $7.21-a share offer from a private equity consortium, having said $7.04 from rival EchoStar “significantly undervalued” the business in July, suggests they have become fed up with explaining their maritime and airline services to the market. “The impression here is that [Inmarsat’s] management is damn tired of explaining each quarter what happened to shipping trends and . . . aviation installs,” reckoned the Financial Times’ Alphaville blog. And it is certainly true that launching new satellites to deliver this connectivity has not been an easy task, or easy sell. Insiders admit that the answer to the question “So what do you do?” is no longer a one-pager, but more like five. Leaving the London party — and no longer having to remind distracted short-term guests why you are there each quarter — must have become too tempting. Why else would Inmarsat recommend a bid at the same level it recently rejected?
Well, rather like Robert Webb’s sneering brain surgeon, that is perhaps taking too disparaging a view.
Inmarsat is arguably recommending an offer of significantly greater value to shareholders for being all in cash, and from a consortium led by its former British co-owner Apax. Echostar’s informal offer was more than half in its own illiquid and sometimes volatile stock, brought more competition issues, and was discounted by directors as such.
With the UK government designating Inmarsat’s satellite links as critical national infrastructure, and clamping down on foreign takeovers of tech groups, a bid from homegrown buyers counts for rather more. As Melrose found in its takeover of GKN, the government is fine with private-equity-style owners if it knows where you went to school.
But it doesn’t take a brain surgeon to work out that Inmarsat shares, at 551p, are now trading above the dollar offer price. Analysts said the offer had released EchoStar from any “pens down” commitment to the Takeover Panel, enabling it to counterbid if it wants to win Inmarsat and stop it leasing telecoms spectrum to US rival Ligardo Networks. Inmarsat’s choice of early dates for shareholder meetings indicates a recognition of this risk.
For EchoStar, though, there are no obvious deal synergies, and no easy ways to pay $3.4bn cash. So, a bit like a brain surgeon encountering a rocket scientist, it has probably met its match.
ConvaTec: stem the flow
As a specialist in dressings and medical devices, ConvaTec is doing a poor job of healing itself, writes Kate Burgess. Nor is it very reassuring that its medical team is being switched midcourse. Christopher Gent, Convatec’s 71-year-old chairman, has quit. So, too, has deputy chair Steve Holliday. Rick Anderson, who was made interim chief executive six months ago after the previous chief left, will stand in as executive chairman. Karim Bitar, boss of Genus, then joins the group as chief in September.
This follows multiple profit warnings. The latest was in February, when Mr Anderson announced plans to spend $150m on cutting costs, weeding out also-ran products and building up core brands in the growing market of wound management. At present, 95 per cent of sales come from just a fifth of Convatec’s products, he says. Analysts pared another few points off margin and growth forecasts.
Mr Anderson cites “execution mis-steps” in the past, including a botched effort to move production to the Dominican Republic. He talks of the need for further surgery and fresh eyes to oversee Convatec’s treatment.
Mr Anderson sees himself as “the continuity play” in the handover of operating theatre responsibilities.
Investors who were sold shares at 225p a shot by Convatec’s private equity owners in 2016 on the basis of rising demand from the elderly for catheters and colostomy bags will ask how it has come to talk of such radical surgery and a share price of 135p.
Disreputable business
Certain high-profile individuals are threatening to “undermine the reputation” of this country. There has been a “roll call of dishonourable . . . decisions”. Brexiters? Enemies of the People? No. Highly-paid executives, according to . . . MPs. Yes, that’s right: MPs reckon it’s business people who are damaging Britain’s reputation. You couldn’t make this stuff up.