Equity Firm Buys Intelsat, Liberty-Dish Bid Falls Short

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Following an auction that included a failed joint bid by Liberty Media and EchoStar Communications, BC Partners will acquire a majority stake in Intelsat for $5 billion, officials said last week.

Intelsat, the world's leading provider of fixed satellite services, signed a definitive agreement for funds advised by BC Partners to purchase a majority of the shares of its parent company, Intelsat Holdings.

The BC Partners-led group will acquire about 76% of the primary ownership of Intelsat Holdings in a deal that values the company's equity at about $5.03 billion. Taking into account the roughly $11.4 billion of Intelsat's debt as of March 31, the enterprise valuation implied by the transaction is about $16.4 billion.

In addition to BC Partners, Liberty Media and EchoStar put in a joint bid for Intelsat, and Loral Space & Communications also took part in the auction, according to The Wall Street Journal.

Intelsat's current shareholders — including funds advised by Apax Partners, Apollo Management, Madison Dearborn Partners, Permira and management — are expected to receive upon closing about $4.6 billion in cash, and will continue to hold about 24% of the primary ownership of Intelsat Holdings.

“This transaction highlights the significant value that Intelsat has created for its shareholders and the tremendous opportunities the business and employees will enjoy going forward,” Intelsat CEO Dave McGlade said in a prepared statement.

“The company has thrived under private equity ownership, including the 2006 completion of the transformative PanAmSat combination that firmly established Intelsat's global leadership position,” he said. “As a result, we have a keen appreciation for the financial and strategic support that a firm such as BC Partners can provide. We are confident that they will continue to endorse Intelsat's objectives for revenue growth and operating improvements.”

McGlade is expected to continue to serve as CEO of Intelstat, which will remain focused on serving its customers worldwide in the media, network services and government sectors.

The deal is expected to close within six to nine months, upon the satisfaction of customary conditions, including appropriate regulatory approvals.

As a result of the anticipated financings, Intelsat's debt is expected to increase by about $3.85 billion at closing.

BC Partners has obtained financing commitments from a group of institutions led by affiliates of Credit Suisse, Banc of America Securities and Morgan Stanley for $5.11 billion.

The proceeds will be used to fund the transaction, repay certain indebtedness and pay transaction fees and expenses. This debt will be assumed by a new entity junior to Intelsat (Bermuda).

As part of the transaction, Intelsat expects to retire about $860 million of existing debt at Intelsat (Bermuda) and to retire the $400 million Intelsat 5.25% senior notes due 2008.

Credit Suisse is acting as financial advisor to Intelsat, whose legal advisors include Wachtell Lipton Rosen & Katz, Wiley Rein, and Paul, Weiss, Rifkind, Wharton & Garrison. Merrill Lynch & Co. and Perella Weinberg Partners LP are acting as mergers and acquisitions advisors, Latham & Watkins LLP as legal advisor and PricewaterhouseCoopers LLP as financial advisor to BC Partners.

BC Partners is an international private equity firm, operating through integrated teams based in Geneva, Hamburg, London, Milan, New York and Paris.

“Intelsat and the FSS [fixed satellite service] sector are in the midst of a cycle of strong performance,” BC managing partner Raymond Svider said in a prepared statement.

“Intelsat is the premier FSS satellite operator, with high-quality assets and a strong global brand,” he said. “Its valuable cable and direct-to-home neighborhoods, strength in network applications, blue chip customer base and solid backlog of long-term contracts create an attractive investment opportunity. We look forward to working with and supporting Intelsat's management team as they pursue their growth strategies.”

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