Satellite operator Intelsat SA (I.N) said it expects its $14 billion merger with peer OneWeb Ltd, which is backed by Japan's SoftBank Group Corp (9984.T), to fall through as it failed to get enough of its creditors to back the deal.
Debt-laden Intelsat and the U.S. satellite startup in February had agreed to merge in a complex and risky share-for-share deal that required debt investors to accept less than full face value on their holdings.
The failure of the deal to close represents a blow to SoftBank Chief Executive Masayoshi Son, a prolific dealmaker who saw an opportunity to combine OneWeb and Intelsat to create a network of satellites to help provide internet access worldwide.
Intelsat said on Thursday it had terminated a series of debt swap offers tied to the deal as its creditors did not accept the terms by the May 31 deadline. Intelsat and OneWeb plan to end their merger on June 2.
"While we are disappointed Intelsat was not able to achieve an acceptable agreement with its bondholders, we continue to be enthusiastic about OneWeb's standalone prospects, and its potential to disrupt the satellite industry and communications business generally," said Alok Sama, SoftBank's president and chief financial officer. "SoftBank will continue to work with the OneWeb management team to seek alternative paths to accelerate its strategy."
Intelsat shares were down about 1.6 percent at $3.03 on Thursday. The company's bonds fell but later pared losses, according to Thomson Reuters IFR.
SoftBank has said it has had discussions with competitors of Intelsat on other potential deals. Shares of other satellite companies were up on speculation that they could be targets of OneWeb.
UK-based Inmarsat plc (ISA.L) closed up 5.6 percent, and Luxembourg-based SES SA SESFg.LU closed up about 4 percent Thursday. U.S. broadband company ViaSat Inc (VSAT.O) was up around 3 percent.
As part of the deal, SoftBank planned to buy voting and non-voting shares in the combined company for $1.7 billion in cash and take a 39.9 percent voting stake.
In the hopes of enticing more participation from bondholders, Intelsat had extended the deadline for the debt swap several times, and also improved the terms. The final offer asked Intelsat debt investors to take a total haircut on their holdings of $2.85 billion.
"There were many stakeholders' interests that needed to be satisfied in this complex transaction," Intelsat CEO Stephen Spengler said in a statement.
Reuters had reported on Wednesday that SoftBank would let the merger drop.
(Reporting by Aishwarya Venugopal in Bengaluru and Jessica DiNapoli in New York; Editing by Anil D'Silva and Bill Rigby)