EchoStar’s Pursuit of Inmarsat Gets a Boost After France’s Eutelsat Backs Out

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June 26, 2018

Inmarsat-Network Ops Centre. Photo: Inmarsat

By Thomas Seal and Angelina Rascouet (Bloomberg) — France’s Eutelsat Communications SA said it won’t make a takeover offer for Inmarsat Plc, a sudden reversal that strengthens EchoStar Corp.’s hand in its pursuit of the British satellite operator.

Eutelsat had said on Monday it might bid for Inmarsat, confirming a report by Bloomberg News. The change of heart means that, under U.K. takeover rules, the Paris-based company now can’t make an offer for six months except in certain circumstances, Eutelsat said Tuesday in a statement.

Eutelsat backing down removes the immediate prospect of a bidding war for Inmarsat with U.S. rival EchoStar, whose preliminary offer for the U.K. satellite operator was rejected this month as being too low. Inmarsat’s share slump in recent years has made it a takeover target in an industry facing new competitive pressures, where incumbents are trying to gain scale and cut costs after a period of heavy capital spending and tepid demand.

Investors recoiled from a potential Eutelsat bid for Inmarsat on Monday, sending Eutelsat shares down 6.2 percent. The shares recovered some of that loss on Tuesday, gaining 2.7 percent by 11:29 a.m. in Paris.

EchoStar Considering Raising Offer for Inmarsat -Source

Inmarsat sank as much as 9 percent in London on Tuesday. The shares had surged 33 percent through Monday since the company disclosed on June 8 that it had rejected a preliminary offer from EchoStar, giving Inmarsat a market value of about 2.9 billion pounds ($3.9 billion).

Strategy U-Turn

Eutelsat would have faced financing and governance hurdles with an Inmarsat takeover, which would have represented a strategy U-turn, Olivier Moral, an analyst at HSBC, wrote in a research note.

The overlap between the companies is relatively small and Eutelsat, which is 26 percent owned by the French state, would have faced potential political opposition, said Bloomberg Intelligence analyst John Davies.

“A purchase of a U.K. satellite company by another that’s backed by the French state is bound to face scrutiny in times of Brexit and could be politically sensitive,” Davies said.

Inmarsat Soars After Satellite Company Rejects EchoStar Bid

Both Eutelsat and Inmarsat are investing in more reliable broadband for airline passengers as they seek new sources of income. Eutelsat’s biggest business remains satellite TV, while Inmarsat’s largest revenue stream is still providing connectivity to the shipping industry. ViaSat Inc. and and SES SA could also potentially find some benefits bidding for Inmarsat assets, RBC analyst Wilton Fry wrote in a note to clients his month.

EchoStar last week said it had a stake of almost 3 percent in Inmarsat, two weeks after its bid for an undisclosed amount was rebuffed. The holding was built prior to Inmarsat’s June 8 announcement, people familiar with the matter said at that time.

Founded by billionaire Charlie Ergen, Englewood, Colorado-based EchoStar was discussing financing for an improved offer working with advisers on its bid, people familiar with the matter said last week.

© 2018 Bloomberg L.P


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