U.S. investor Oaktree makes last-minute

This post was originally published on this site

Billionaire Howard Marks’ Oaktree Capital Management has hit out against the $3.4 billion takeover of Inmarsat, arguing that it “significantly” undervalues the British satellite company, just days before it was due to be delisted from the London stock market.

The Los-Angeles based asset manager, which holds a 2.85% stake in Inmarsat ISAT, +0.04%, believes the satellite operator could be worth at least $300 million more if U.S. regulators give the go-ahead to Virginia-based Ligado Networks to build a 5G service. Ligado, a satellite communications business, has an agreement in place with Inmarsat to lease spectrum from the U.K. company.

Analysts at U.S. bank Jefferies said the value of the Ligado lease could make Inmarsat worth between $1 billion and $3 billion more.

The FTSE 250-listed satellite company accepted a takeover offer in March from a consortium led by buyout groups Apax Partners and Warburg Pincus and two Canadian pension funds.

The U.K. government intervened in the deal in July because of national security concerns. Inmarsat provides a large chunk of its satellite products to the U.S. government and military.

Inmarsat made a series of legally binding commitments that include keeping a substantial part of the engineering workforce and the network operations center, which controls its fleet of satellites, in the U.K. In October, the U.K. government gave the green light to the buyout.

However, in a letter published on Tuesday, Oaktree said more than $167 million would be payable to Inmarsat once Ligado’s lease is approved by the U.S. Federal Communications Commission. Ligado would also be required to pay a further $136 million in 2020, as well as annual leases subject to inflation for 89 years.

Oaktree first raised the issue of the value of the Ligado contract in May when it voted against a scheme of arrangement — a takeover mechanism which only needs approval from 75% of shareholders. Almost 80% of Inmarsat shareholders backed the deal, which now needs court approval to make the bid unconditional.

The asset manager said it had twice asked Inmarsat’s board, led by chief executive Rupert Pearce, to consider two courses of action: postponing the court hearing date, scheduled for November 12, to early December; or negotiate a contingent value right — a conditional payment based on the scale of future sales to Ligado.

“If the board chooses neither path, we currently intend to appear at the hearing,” Oaktree said in a statement.

In response, Inmarsat said: “The board considers that there has been no material change since it recommended the acquisition and therefore intends to maintain the scheme sanction hearing scheduled for 12th November 2019.”

The Apax-led consortium says that its all-cash $7.21-a-share deal represents a premium of 46% to the closing price of Inmarsat’s shares on January 30 — the day before it submitted its bid.

Shares in Inmarsat were trading slightly higher at 557.40p in London mid-morning on Nov. 5.

Add Comment