SoftBank is leading efforts to consolidate the space technology sector with talks to merge OneWeb, the US satellite start-up it backs, with Intelsat, one of the world’s largest commercial satellite operators.
Bonds sold by Intelsat surged on Monday after it was reported that the deeply indebted satellite operator was nearing a deal with SoftBank to merge with OneWeb, which raised $1.2bn from the Japanese group and other investors in December.
The deal is expected to be unveiled shortly and is likely to involve a capital injection of $1.7bn in cash from SoftBank, some of which was to be used to pay off bondholders, said a person briefed on the deal. The transaction, which would have an enterprise value of $18bn, is conditional upon bondholders agreeing to the offer price, although the rally in the debt has now wiped out a part of the premium on the bonds’ trading prices.
The company’s debt that matures in 2023 whipsawed after news of the deal was first reported by Sky News, rising from 43 cents on the dollar to a high of 62 cents before paring some of its advance. The group’s 2024 maturing bonds jumped 14 cents on the dollar to 80 cents. The company’s share price in New York gained 25 per cent.
Intelsat has laboured under a debt load of more than $15bn after its 2008 leveraged buyout by private equity groups BC Partners and Silver Lake. The company has completed distressed debt exchanges to reduce liquidity strains, moves that rating agency S&P Global has said constitutes default.
The Luxembourg-based company has struggled to increase revenues since its buyout, with sales sliding in each of the past three years. Jacques Kerrest, Intelsat’s chief financial officer, told analysts on a conference call in October that the company’s priority last year was to “raise liquidity” through the debt exchanges. The company was poised to report fourth-quarter results before markets open on Tuesday.
OneWeb, which competes with Elon Musk’s SpaceX, has said it would use fresh capital from its latest funding round in December to launch a satellite network to provide affordable internet access to remote parts of the world. In addition to SoftBank, the US venture is also backed by US chipmaker Qualcomm, the European aerospace group Airbus, Sir Richard Branson’s Virgin, and Bharti, the Indian conglomerate.
SoftBank’s involvement in the shake-up of the satellite industry comes as Masayoshi Son, the billionaire founder of the acquisitive Japanese group, is also preparing to consolidate the US telecoms industry. Mr Son has recently said he is open to all options for Sprint, the US wireless carrier SoftBank owns, including a merger with rival T-Mobile USA or other companies.
Mr Son’s deal activity has accelerated after SoftBank spent $32bn to acquire UK chip designer Arm last year. Most recently, the company positioned itself in the world of private equity and hedge funds with a $3.3bn acquisition of US alternative asset manager Fortress Investment Group.
More acquisitions are expected as SoftBank emerges as one of the world’s largest investors with the imminent launch of its record-setting $100bn technology fund. SoftBank was expected to approach the Vision Fund to see if it would be interested in investing in the OneWeb/Intelsat deal, said a person close to the talks.
Intelsat declined to comment. OneWeb and SoftBank were not immediately available for comment.
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