MONTREAL and OTTAWA – Telesat won’t be going public after all. Bell Canada Enterprises announced this morning it has sold 100% of the satellite company to Public Sector Pension Investment Board and Loral Space & Communications.
The two companies (PSPIB is a crown corp.) will pay $3.25 billion plus the assumption of $172 million of debt, under a newly formed joint venture between PSP Investments and Loral (all figures in C$). The new Canadian holding company will be known as Telesat and will continue to be based in Ottawa.
The company had previously announced its intention to explore all options to monetize Telesat’s value and earlier this year the company said it would pursue an IPO. This new all-cash deal provides more value to BCE shareholders than an IPO, said a BCE release.
In conjunction with the sale, BCE has put in place a set of commercial arrangements between Telesat and the telco’s primary video unit, Bell ExpressVu, that guarantee ExpressVu access to current and expanded satellite capacity, including the launch of Nimiq 5 in 2009.
The combined assets of Telesat and Loral will make it one of the world’s largest operators of telecommunications satellites. Loral will transfer its fixed satellite services and network services assets, and, together with Telesat assets, the joint venture will hold a fleet of eleven satellites and four additional satellites to be launched over the next three years.
The new company will have combined trailing 12 months revenue for the period ended September 30, 2006 of approximately $658 million and $5.6 billion of backlog, generating combined trailing 12 months adjusted EBITDA for the period ended September 30, 2006 of approximately $341 million.
The new company will feature a management team from both Telesat and Loral Skynet and Daniel Goldberg will continue to serve as CEO. Loral and PSP Investments will hold a 64%and 36% economic interest, respectively, in the new company.
Loral’s total voting equity will be 33.3% with PSP Investments and other Canadian investors having 66.7%, satisfying Canadian ownership regulations.
"Net of Telesat’s debt, BCE will realize total proceeds of $3.25 billion from the all cash transaction, which represents a significant premium to comparable public market valuations. Because of existing capital losses, the transaction will be completed on a tax-free basis," said the Bell release.
The boards of directors of PSP Investments, Loral and BCE have each approved the transaction, which is subject to customary closing conditions, including approvals of the relevant Canadian and U.S. government authorities.
The transaction is expected to close by mid-2007.
"The combination of Telesat, with its strong Canadian presence, and Loral Skynet with its overseas coverage creates a great long-term growth asset for PSPIB," said Gordon J. Fyfe, president and CEO of the pension fund. "This joint venture supports both Telesat and Loral’s current customers (including BCE) and presents an opportunity to build a Canadian presence in this global industry. We look forward to this exciting venture and would like to express our appreciation to MHR Fund Management LLC, Loral’s largest shareholder, for introducing us to the transaction and to Loral team for their support and assistance."
The Public Sector Pension Investment Board is a Canadian crown corporation established by Parliament by the Public Sector Pension Investment Board Act. Its mandate is to manage employer and employee contributions made after April 1, 2000 to the federal Public Service, the Canadian Forces and the Royal Canadian Mounted Police pension funds. It has approximately $30 billion under management.
"At the outset of this process, we set three goals," said BCE CEO Michael Sabia, in the release. "First, we were determined to surface the value of the asset. Second, we wanted to make certain any transaction fully protected the future of ExpressVu. And finally, we wanted to position Telesat as a truly global player in a rapidly consolidating industry."
"This transaction meets each of those objectives," Sabia added. "The new company will be the fourth largest satellite services operator in the world. Global in scale, but Canadian based and Canadian controlled.
"Telesat has operated independently from our core communications business for some time. Given current industry valuations in the fixed satellite services business, we believe this is an opportune time to surface value for BCE shareholders," he added.
