Shares rise 70p after latest approach from funding consortium

Global satellite communications company Inmarsat Plc has received a new takeover offer from a transatlantic consortium comprising UK private equity firm Apax Partners, US-based Warburg Pincus, and two Canadian pension funds – CPPIB and the Ontario Teachers’ Pension Fund.

The US$3.3bn non-binding cash offer was made on January 31 and, if accepted, would take the London-listed business private.

The consortium offered US$7.21 a share, which is somewhat above the $5.35 cash and share offer made by US company EchoStar last year and a third potential bid from a French company – both of which later withdrew. Once the offer was made known yesterday, Inmarsat shares rose some 70p. Under UK takeover rules, the consortium has until April 16 to make a formal offer.

Market speculation is that with this latest offer being cash only, it might just make a difference from the previous Echostar approach. The US$7.21 (543p) offer was set at a premium of 24% above the 437.8p value of Inmarsat’s share price as of the close on March 20, 2019 as a result of the approach.

In a comment, Inmarsat said: “The proposal remains under discussions between the company and the consortium. There can be no certainty as to the terms on which any offer would be made. Nor is it certain that the discussions will lead to any firm offer for the company.”

Inmarsat shares have had a difficult time over the past couple of years, having reached a high of over £11 in December 2016 and experiencing a low of £3.62 in March last year.

Inmarsat recently issued its 2018 results which highlighted good growth in revenue and EBITDA, with year-on-year increases of 5.3% and 4.2% respectively and consistent quarter-on-quarter improvement. This result, building on the return to growth established in 2017, was driven by the strength of its global GX broadband offering, particularly in Aviation, Government and Maritime, and by lower indirect costs. Aviation revenues grew by over 40%, within which In-Flight Connectivity revenues more than doubled.

Among the operational highlights were:

  • 2018 Group Revenue (ex-Ligado) increased by $71.6m, or 5.7%, to $1,334.5m, including a $26.6m increase in Q4
  • Maritime: consistent double-digit growth in revenues and further market share capture in the fast growing VSAT segment. New strategies are being implemented in the mid-market, to help protect market share, as customers migrate to VSAT
  • Government: sustained and growing penetration of the US customer base. Revenues little changed in other markets
  • 2018 Group EBITDA (ex-Ligado) increased by $27.0m, or 4.4%, to $639.5m, including $23.3m increase in Q4, reflecting growth in revenue and absence of further restructuring charges
  • 2018 Group Profit After Tax: down $60.0m (32.4%) to $125.0m, with higher EBITDA more than offset by higher depreciation
  • Further development of technology roadmap: GX-5 and I-6 satellite programs on track, new lower cost, higher functionality network architecture in development to drive meaningful moderation in capex from 2021

These operational highlights exclude the impact of Ligado, which is not part of Inmarsat’s core operations. Ligado contributed revenues of $130.7m (2017: $128.8m) and EBITDA of $130.6m (2017: $126.8m)

“Inmarsat delivered consistent growth in 2018, building on our return to growth established in 2017,” says CEO Rupert Pearce. “I am particularly pleased by the 85% revenue growth in GX services and a doubling of our IFC revenues, both of which augur well for the future.

“We remain focused on building and defending substantial market share in our target markets, supported by our diversified product portfolio and leading-edge networks,” he adds. “This will ensure we are able to fully capitalise on both the immediate and longer-term growth opportunities in these markets.”

Pearce forecasts that: “Supported by a tightly controlled cost base and an infrastructure capital investment programme, which we are confident will meaningfully and sustainably moderate from 2021, we expect to generate sustained free cash flow growth over the medium to long term.”