Intelsat to Purchase PanAmSat for $3.2B

Monday, August 29th 2005, 12:49 pm

By: News On 6

NEW YORK (AP) _ Satellite pioneer Intelsat Ltd. said Monday it is acquiring PanAmSat Holding Corp. for $3.2 billion in a deal that would create a commercial satellite powerhouse with expanded capacity to deliver video, corporate data and government communications.

Intelsat, created in 1964 through a partnership of 147 nations that was privatized in 2001, said it is paying $25 a share for PanAmSat's outstanding stock. Bermuda-based Intelsat said it also will refinance or assume about $3.2 billion in PanAmSat debt.

The purchase price represented a 26 percent premium over last week's closing quote for PanAmSat, whose shares jumped $4.08 to $23.88 in Monday's midday trading on the New York Stock Exchange.

Wilton, Conn.-based PanAmSat became a publicly traded company in March after an initial public offering priced at $18 per share. That IPO came about a year after PanAmSat was acquired in a $3.55 billion buyout led by Kohlberg Kravis Roberts & Co.

The buyout also comes about half a year after Intelsat was acquired by an investment partnership named Zeus Holdings Ltd. for $3 billion. Before that deal, Intelsat's top investor was Lockheed Martin Corp. with a 24 percent stake, followed by France Telecom and VSNL of India with 5 percent apiece.

The boards of both Intelsat and PanAmSat have approved the transaction, and shareholders owning roughly 58 percent of PanAmSat's shares have agreed to approve the merger, Intelsat said.

The combined company is expected to generate more than $1.9 billion in annual revenue, with 53 satellites and customers in over 220 countries and territories. Intelsat said the transaction also will enhance its financial strength, revenue and free cash flow.

Intelsat said David McGlade, its chief executive, will continue to serve as CEO after the deal is closed. PanAmSat Chief Executive Joseph Wright is expected to become chairman.

Both executives asserted in a conference call with reporters that they don't expect the deal to spark worries about lost competition that might lead government regulators to block the merger or force the companies to sell any satellites to rivals.

``We have very complementary businesses'' in terms of geography and customers, said McGlade. ``While Intelsat has been strong around the world, especially in developing countries, PanAmSat has a strong business in the Americas with video.''

The acquisition is expected to close in about six to 12 months, pending approval from PanAmSat shareholders and regulators.

Before the deal closes, Intelsat is expected to transfer virtually all of its assets and liabilities to a new subsidiary, and then both PanAmSat and the unit will become subsidiaries of Intelsat, with PanAmSat continuing as a separate corporate entity.

Intelsat said it received financing commitments from a group of firms led by Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Credit Suisse First Boston LLC and Lehman Brothers Inc. for the full purchase price.