Softbank strikes first deal for Vision Fund

The $1.7bn investment in satellite operator Intelsat will see majority owner BC Partners retain a stake alongside fellow PE house Silver Lake.

Softbank has agreed to invest in BC Partners-owned satellite operator Intelsat, which it plans to merge with OneWeb, a smaller satellite operator currently 20 percent owned by Softbank. The combined company will then be offered to Softbank's $100 billion Vision Fund in what will likely be the giant fund's first investment.

The Japanese telecommunications and internet business will invest $1.7 billion to acquire a 39.9 percent stake in the combined company, although the deal is contingent on at least 85 percent of debt-laden Intelsat’s bondholders agreeing to swap their securities for cash and shares in the unified company.

The deal for Luxembourg-based Intelsat, which runs a fleet of more than 50 communications satellites, represents a partial exit for UK buyout house BC Partners, which owns 53 percent of the company, and US technology investor Silver Lake, which owns 12 percent. A spokeswoman for Intelsat said the deal would reduce BC Partners’ holding to 10 percent and Silver Lake’s to 2 percent.

The two firms acquired the company for $5 billion in 2008 from a consortium consisting of Madison Dearborn Partners, Apax Partners, Permira and Apollo Global Management, which had clubbed together in 2004 to pay $3.1 billion for the business. Shortly afterwards the firms funded the $3.2 billion add-on of rival PanAmSat.

In April 2013 BC Partners and Silver Lake floated around 19 percent of the company on the New York Stock Exchange, raising just under $350 million, but did not sell their shares in the business. The spokeswoman said neither firm had sold shares since the flotation.

The company has laboured under a large debt load since its first leveraged buyout; it assumed $11.4 billion in debt when acquired by BC Partners and Silver Lake. Last September Intelsat completed a $142 million bond exchange, its third debt reduction effort last year. It currently has a debt load of just under $15 billion. The Softbank deal would see this reduced by $3.6 billion.

“We are in the midst of a technological revolution and, provided we receive the necessary cooperation from Intelsat bondholders, we welcome the opportunity to support OneWeb as it creates the foundation for next-generation global internet services anywhere on the planet. This combination is consistent with SoftBank’s strategy of investing in disruptive, foundational technologies that are building the infrastructure for tomorrow, and this proposal offers a win-win opportunity to accelerate OneWeb’s mission while enhancing the Intelsat balance sheet,” SoftBank Group Corporation chairman Masayoshi Son said.

Last month Son said that the group’s SoftBank Vision Fund, the world’s largest tech fund, is preparing for a final close. Media reports suggest it has already hit its $100 billion target. The combined OneWeb company will be transferred to Vision Fund on completion of the deal.