Circumstance does create some odd bedfellows, or at least bid partners, and the latest corporate pairing is raising eyebrows in the US, where Liberty Media and EchoStar Communications are preparing a surprising joint offer for satellite-communications provider Intelsat, according to the Wall Street Journal. The news, reported Thursday on the Journal’s website, comes on the day Intelsat is preparing to accept final bids for its auction.
The pairing represents a “bold co-operation” between satellite-TV broadcaster EchoStar and media holding company Liberty, which is slated to take control of competing satellite-broadcaster DirecTV Group in the coming months. The two firms still could decide against making a formal bid, the Journal notes.
Intelsat already supports about $11.5bn in debt, after a series of mergers and one-time dividends paid to its group of four private-equity owners. It is expected to draw bids of $4.5bn to more than $5.5bn from groups that include Providence Equity Partners, Carlyle Group and Australia’s Macquarie Bank, the Journal says citing people familiar with the auction. Blackstone Group, which prompted the auction, is not expected to bid. But “the most intriguing combination is clearly the Liberty-EchoStar group”, the Journal says.
Intelsat was acquired by a consortium of investors including Apax Partners, Permira Advisors, Apollo Management and Madison Dearborn Partners in 2004 as a wave of consolidation spread through the global satellite industry, the FT reported last month. The buyers wrote an equity cheque of about $500m in the deal, meaning they would make about 10 times their money on a sale, if successful, the FT added
If it succeeds, the joint Liberty-EchoStar bid “would create a highly unusual partnership between two strong-willed rivals who run satellite-to-home broadcast systems that currently compete with each other”, the Journal added. “But the two have been exploring ways to work with one another, according to people familiar with their discussions. Their main goal is to reduce operating costs, these people say, and a substantial amount could be cut from both firms with an Intelsat purchase.”
Antitrust questions are likely to come up in the course of the auction, which could conclude as early as this weekend, the Journal says. However, the satellite-broadcast segment is different from the satellite-services business, where Intelsat is the industry leader, it notes. Intelsat provides wholesale capacity over 51 satellites, and its best customers are cable-television providers. The businesses rely on separate fleets, ground facilities and capital-investment schedules.