Satellite communication systems vendor ViaSat has signed a definitive agreement to acquire WildBlue Communications, a privately held satellite broadband service provider, in a cash-and-stock deal valued at $568 million.
WildBlue provides service using ViaSat's SurfBeam networking system to more than 400,000 consumers and small business subscribers in areas "unserved and underserved" by cable modem or DSL services in the contiguous U.S. Wild Blue's service is resold by DirecTV, Dish Network, AT&T and the National Rural Telecommunications Cooperative.
When the deal closes, WildBlue investors are expected to have the right to nominate one representative to the ViaSat board of directors and have agreed to allow John Malone's Liberty Media to select the representative.
"Our longstanding investment in WildBlue reflects our keen interest in new broadband access and media delivery networks of all types," said Mark Carleton, Liberty Media senior vice president and WildBlue's chairman. "We believe that combining the service and technology companies, expanding the market applications, and adding the timely quantum leap in network capacity expected by the ViaSat-1 satellite establishes an even more competitive platform for further growth and value creation for shareholders."
Other WildBlue investors -- Intelsat, Tennenbaum Capital Partners, the National Rural Telecommunications Cooperative, and Kleiner Perkins Caufield & Byers -- are also expected to become ViaSat shareholders as a result of the transaction.
ViaSat said the deal will accelerate WildBlue's expansion using the high-capacity ViaSat-1 satellite, scheduled to launch in early 2011. According to the company, ViaSat-1 will have nearly all of its capacity aimed at areas where WildBlue growth is constrained by lack of cost-effective bandwidth.
"By integrating ViaSat-1 and its ground network technology into the WildBlue operational and distribution platform, we believe we can meaningfully reduce our operational execution risks," ViaSat chairman and CEO Mark Dankberg said in announcing the deal.
Carlsbad, Calif.-based ViaSat said free cash flow generated by WildBlue is expected to "meaningfully exceed" the transaction financing costs and that it expects WildBlue cash flow to become a source of funds to complete ViaSat-1 and accelerate network build-out. For the trailing 12-month period ended June 30, WildBlue generated revenues of approximately $209 million and $52 million of unlevered free cash flow.
The transaction is expected to close in the quarter ending April 2, 2010, which is the end of ViaSat's fiscal year. The transaction is not subject to a vote of the ViaSat shareholders.
Credit Suisse Securities (USA) LLC and Latham & Watkins LLP acted as lead financial and legal advisor, respectively, to ViaSat. Morgan Stanley and Skadden, Arps, Slate, Meagher & Flom acted as financial and legal advisor, respectively, to WildBlue.