Private Equity News & Analysis

Intelsat buyout under threat

The Zeus consortium which had agreed to purchase global satellite company Intelsat in a deal expected to be completed next month are considering its position after the failure of one of the company’s satellites.

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The proposed $5 billion (€3.8 billion) buyout of global satellite communications company Intelsat by private equity consortium Zeus has been left in doubt after the failure of one of the company's satellites.

The company claimed that the failure of Intelsat Americas-7, which provides digital television to North and Central America, would not lead to significant revenue loss because most customers had been transferred to other satellites within hours.

However, the satellite was not insured and its replacement will have to be paid for out of the company's capital expenditure budget. The value of the satellite, which was only five years into a typical orbital life of 15 years, has not been disclosed.

The Zeus consortium consists of private equity firms Apax Partners and Permira in London, New York's Apollo Management and Chicago's Madison Dearborn Partners.

Under the terms of the deal agreed in August, the consortium now has the right to abandon the buyout. Intelsat said that Zeus is evaluating the impact of the loss of the satellite on its position.

Bermuda-based Intelsat provides communications services to broadcasters, corporations and governments. The company, founded in 1964, helped broadcast the images of the first moon walk. Intelsat owns 23 satellites and has offices around the world.

The company went private in 2001 with a plan to eventually go public again.
Several months ago, the company stepped back from plans to undergo an IPO.
Its biggest stakeholders are currently Lockheed Martin with 24 percent, Tata Sons of India with 5.4 percent, and France Telecom with 5 percent.

There has been a great appetite for satellite operators among private equity firms this year. In April, Kohlberg Kravis Roberts announced an agreement to buy satellite operator PanAmSat in a deal worth $3.55 billion. Two months later The Blackstone Group acquired Dutch satellite communications business New Skies Satellites for $956 million in cash. Last Week, BT Group announced the sale of its 16 percent stake in French satellite provider Eutelsat to GS Capital Partners 2000 for £363 million.