Private Equity Firm Blackstone Set Sights on Intelsat

[BGonaSTICK]

New York-based private equity firm The Blackstone Group LP, which bought satellite operator New Skies Satellites N.V. in 2004 for $956 million in cash, is reported to have triggered what could become a bidding war for Intelsat, Ltd, offering $6 billion to buy the world’s largest commercial satellite operator.

Reports are rife in world financial circles and media that the four private equity firms that took control of Intelsat in 2004 for $3.1 billion are determined to part with their prized investment for a hefty profit. A Bloomberg report cites two unnamed sources close to the deal as the source of the Blackstone bid. Should they accept Blackstone’s offer, Madison Dearborn Partners Llc, Apax Partners Worldwide LLP, Permira Advisers LLP and Apollo Management LP, stand to make over 10 times the $515 million in cash they paid for Intelsat in 2004.

Each also bought a 25 percent stake in Intelsat, valuing the equity at some $3.1 billion. They also agreed to refinance Intelsat's $2 billion debt. Currently, Intelsat has a long-term debt load of $11 billion, which the new owner will absorb. Intelsat has reportedly hired Credit Suisse to seek other potential buyers,according to various media reports..

A few months after the change in ownership, Intelsat bought rival PanAmSat Holding Corporation for $3.2 billion, creating the world's largest commercial satellite operator with 51 satellites. Luxembourg-based SES Global SA, the second largest satellite operator, has 43 satellites.

Commercial satellite operators are favorite targets for private equity firms since they generate long-term cash flows from broadcasters and governments.

Intelsat issued a statement at the ongoing NAB show in Las Vegas saying that "our company policy is not to comment on market rumors and on potential strategic or capital market activities.” Blackstone and the four equity partners have refused to confirm or deny the planned sale.

Reporting on the company’s operating results for 2006, CEO David McGlade reported Intelsat revenues of $1.7 billion, a rise $491.2 million, or 42 percent year-on-year. Intelsat’s PanAmSat business, acquired in July 2006, contributed some $456.7 to the revenue increase, including $37.0 million for the operations of the government business of G2 Satellite Solutions Corporation.

Intelsat, however, took a net loss of $368.7 million in 2006. The net loss reflected the impact of an asset impairment charge of $49.0 million to write down the net book value of one of the company's satellites that experienced an anomaly in September 2006. It also reflected the impact of restructuring costs of $26.5 million related to the PanAmSat acquisition.

"In 2007, we intend to generate incremental, sustainable growth in our media, network, and government services businesses, which enjoy leading market positions worldwide and benefit from the geographic and service diversity available on the Intelsat global system,” McGlade said in the 2006 financial report.