Intelsat Buys PanAmSat for $3.2B

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The consolidation wave in the satellite industry continued Monday after Intelsat Ltd. said it would acquire PanAmSat Corp. in a $3.2 billion deal.

Intelsat will pay about $25 per share for PanAmSat, a 25% premium to its Aug. 26 closing price and 40% above its March initial public offering price of $18 per share.

News of the deal sent PanAmSat stock skyward -- it was up $4.03 each (20%) to $23.83 per share in afternoon trading Monday.

The deal will vault the combined Intelsat/PanAmSat into the No. 1 spot among satellite operators with 53 satellites, besting SES Americom’s 18 operational satellites, primarily in North American orbit. The combined Intelsat/PanAmSat will have about 20 satellites covering North America.

The deal still needs regulatory and shareholder approval, but is expected to close in six-to-12 months. The new company will have its administrative headquarters in Washington, D.C. and will be called Intelsat.

The deal comes about a year after DirecTV Group Inc. sold PanAmSat to a group of private-equity firms -- Carlyle Group LLC, Providence Equity Partners Inc. and Kohlberg Kravis Roberts & Co. -- for about $3.6 billion and the assumption of $750 million in debt. The three private-equity firms sold about 42% of PanAmSat to the public in March.

In announcing the deal, Intelsat CEO David McGlade -- who will retain that position in the new company -- said the combination will strengthen both players.

“Together we will have a more comprehensive suite of video, voice and data products, including consumer broadband by satellite, HDTV, video-on-demand an IPTV. This will give our customers the ability to build regional and global networks with much greater efficiency,” McGlade said on a conference call with reporters. “PanAmSat has strong relationships with its video-centric customer base, including the leaders in cable TV programming. At Intelsat, we have been a pioneer in reaching a number of developed and emerging markets, through our network service providers, video partners and with governments throughout the world. Together the combined company can expand its reach while better serving existing customers.”

Intelsat’s main strength is in data transmission -- the U.S. government is one of its biggest customers -- and in telecommunications. PanAmSat’s main strength is in video.

“Two-thirds of our revenue is in video, about half of that in the U.S.,” PanAmSat CEO Joseph Wright said on the conference call. “Most of Intelsat’s are in the area of telephony, data, broadband, the government and international. I would say they are very complementary. We really don’t have that much overlap.”

PanAmSat counts as its customers such major cable networks as ESPN, Discovery Communications Inc., Home Box Office, A&E Network, Black Entertainment Television, Cable News Network, Fox Sports Net, Lifetime, MTV: Music Television, Starz Encore Group, TBS, The Golf Channel and USA Network.

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