Inmarsat Slumps After Rejecting $4.2 Billion Offer From EchoStar

(Bloomberg) -- Billionaire Charlie Ergen's EchoStar Corp. made its 3.2 billion pound ($4.2 billion) proposal to buy Inmarsat Plc public in an appeal to investors on Friday, with hours to go before a deadline for a formal bid.

EchoStar said its second, improved cash and stock offer for Inmarsat was rebuffed by the British satellite company's board on July 4. The proposal values Inmarsat at 532 pence per share and also includes a payment to convertible bond holders, according to a statement from EchoStar. Inmarsat shares fell as much as 11 percent in London and traded at 469.50 pence as of 9 a.m.

“The board remains highly confident in the independent strategy and prospects of Inmarsat,” London-based Inmarsat said in a statement.

EchoStar continues to try to win over Inmarsat, which has become vulnerable to takeover attempts with its stock slumping as it faces rising competition in its core maritime business and in new areas such as in-flight wifi. EchoStar would gain valuable airwave licenses owned by Inmarsat, which could be used for 5G mobile services.

“It is clear from this offer that EchoStar is looking to pick up ISAT on the cheap,” Robert Berg, an analyst at Berenberg, wrote Friday in a note to clients. Giles Thorne, an analyst at Jefferies, wrote in a note that with an evident bid-ask spread and no other suitors, EchoStar could turn hostile in time.

EchoStar said it would be prepared to turn the proposal into a firm offer if it can get an extension to a deadline of 5 p.m. U.K. time on Friday imposed by British regulators. The Englewood, Colorado-based company made a preliminary approach last month but was spurned by Inmarsat, which considered it a low-ball offer. France's Eutelsat Communications SA weighed a rival offer but backed away.

‘Strategically Compelling'

“The combined group would be one of the world's leading satellite providers and be well supported by a global portfolio of complementary assets and service offering,” EchoStar said in the statement, calling the combination “strategically compelling.”

Inmarsat will probably hold out for an offer of 750 pence per share, analysts at Royal Bank of Canada wrote in a note Wednesday.

Aviation services are seen by Inmarsat as its biggest growth driver in the coming years and it is also diversifying into businesses including connected cars, after a protracted slowdown in the shipping industry. Satellite operators are facing new competition from low-earth orbit systems and incumbents are trying to gain scale and cut costs after a period of heavy spending.

New competition is also emerging for Inmarsat in the maritime business, its biggest revenue generator, after U.S.-based Iridium Communications Inc. last month won regulatory approval to start offering services from 2020.

To contact the reporter on this story: Thomas Seal in London at tseal@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Thomas Pfeiffer

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