$5bn space race for Murdoch's satellite business

Click to follow

Media tycoon Rupert Murdoch is set to sell the commercial satellite business he controls for more than $5bn (£3.4bn).

Five bidders made offers last week for PanAmSat, the Nasdaq-listed company 81 per cent owned by DirecTV, the US satellite broadcaster which Mr Murdoch's News Corporation took control of last year in a $6.8bn deal.

The offers are understood to value PanAmSat at nearly $5bn. In addition, Mr Murdoch is understood to have put two other smaller DirecTV satellite businesses up for sale, VSAT and the Spaceway broadband project. Analysts say they could be worth more than $600m.

PanAmSat was quietly put on the block earlier this year, with investment bank CSFB handling the auction. It set a deadline of last Tuesday for final offers.

It is understood that three venture capital consortiums have made bids in excess of $4bn. They are a team led by Kohlberg Kravis Roberts, which is understood be working with Paris-based satellite group Eutelsat; a partnership of Apollo Management and Madison Dearborn Partners; and a consortium of Thomas H Lee Partners, Bain Capital and Quadrangle Group.

All three of PanAmSat's main competitors - Eutelsat, SES Global of Luxembourg and the Dutch group New Skies - are interested in purchasing satellites from PanAmSat. However, CSFB has made it clear that it does not want the sale to be held up by any regulatory problems, so none have made direct bids.

CSFB hopes to sell the business within a few weeks. It is expected to choose a preferred bidder within days. Usually, when venture capital groups are involved, this leads to last- minute horse trading as some of those excluded from the bidding try to join the winning team.

The bids are above the market value of PanAmSat, which stood at $3.8bn on Friday. The group, which has $1.5bn of debts on its books, only has revenues of $831m and made just $99.5m of taxable profits last year.

However, the attraction of PanAmSat is its market position and contacts. The group, which was originally created by General Motors, owns 24 satellites, which are positioned over North and South America. The satellite TV market is still growing in the Americas and PanAmSat is also getting more government business.

The sale would help Mr Murdoch recoup a chunk of what he paid to gain control of DirecTV.

He bought a 34 per cent stake in the company last year through Fox Broadcasting, which is itself 81 per cent owned by News Corp. This minority holding has given him control over DirecTV, which has more than 11 million subscribers, and Mr Murdoch has become chairman of the board.

Analysts have expressed doubts about the growth prospects of the satellite business, preventing News Corp getting the sort of rating Mr Murdoch thinks it deserves.

Mr Murdoch said earlier this month that he was changing the domicile of News Corp from Australia to the US in the hope of getting a better rating for the shares.

Comments