July 16, 2019 / 6:45 AM / a month ago

British watchdog to review Inmarsat's sale to private equity consortium

LONDON (Reuters) - The Competition and Markets Authority (CMA) said on Tuesday it was looking into whether the proposed acquisition of Britain’s largest satellite company Inmarsat (ISA.L) by a private equity-led consortium would affect the competitive landscape.

FILE PHOTO: Technicians work on the Inmarsat S-Band/Hellas-Sat 3 satellite in the clean room facilities of the Thales Alenia Space plant in Cannes, France, February 3, 2017. REUTERS/Eric Gaillard

The watchdog invited interested parties to comment by July 29.

The review comes amid a tough regulatory environment for mergers and acquisitions (M&A), with the CMA previously blocking Sainsbury’s (SBRY.L) 7.3 billion pound takeover of Walmart-owned Asda (WMT.N) in April.

Private equity-led deals are typically seen as less damaging to competitors as buyout funds tend to cash out in three to five years after executing their turnaround plans.

But a takeover of Inmarsat was expected to be closely scrutinised by the British government and regulators as the satellite company is seen as a strategic asset.

Founded in 1979, Inmarsat was set up by the International Maritime Organization as a way for ships to communicate with shore and make emergency calls.

The FTSE 250 company, which has a market value of 2.6 billion pounds, sees a growing opportunity to supply in-flight broadband services to commercial aircraft, having partnered with U.S.-headquartered Panasonic Avionics, a unit of Japan’s Panasonic Corp, in September last year.

Inmarsat became a target for private equity investors after turning down an approach from U.S. satellite group EchoStar Corp (SATS.O) last year.

In March it agreed to be bought by a group of heavyweight buyout funds including British-based Apax Partners, U.S.-based Warburg Pincus and the Canada Pension Plan Investment Board (CPPIB) for $3.4 billion.

The $7.21 per share offer, which was also supported by the Ontario Teachers’ Pension Plan Board, came at a premium of about 24 percent.

The private equity bidders are looking to take the company private and will try to revive growth to make a profit.

Inmarsat reported a 13 per cent fall in first-quarter earnings at the end of March, hit by weak demand from the shipping sector and a lower contribution from partner Ligado.

Higher costs also ate into the company’s profit. Total net operating costs rose to $194.5 million from $170.5 million a year earlier.

Reporting by Pamela Barbaglia, editing by Louise Heavens and Kirsten Donovan

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