Loral, Canadian Pension Fund Acquire Telesat

NEW YORK and MONTREAL, Dec. 19, 2006/Satnews Daily/ ― Loral Space & Communications Inc. (NASDAQ: LORL) has partnered with a Canadian pension fund, the Public Sector Pension Investment Board, to acquire 100 percent of the stocks of Telesat Canada for approximately $2.8 billion (CAD 3.25 billion), plus the assumption of $148 million (CAD 172 million) of debt from BCE Inc. (TSX/NYSE: BCE).
 

Under the agreement, Loral will transfer the fixed satellite services and network services assets of Loral Skynet to a new Canadian company, to be known as Telesat, based in Ottawa formed by Loral and PSP Investments.

As part of the transaction, Loral will contribute to the new company the fixed satellite services and network services assets of its Loral Skynet subsidiary. This gives the enlarged Telesat a global footprint and will make it the fourth-largest satellite operator in the world based on the number of satellites in orbit. 

Loral said the new company will have a combined fleet of eleven satellites and four additional satellites to be launched over the next three years. The new company will have combined trailing 12 months revenue for the period ended September 30, 2006 of approximately $568 million (CAD 658 million) and $4.9 billion (CAD 5.6 billion) of backlog, generating combined trailing 12 months Adjusted EBITDA for the period ended September 30, 2006 of approximately $295 million (CAD 341 million).

The new company will feature a management team to be drawn from both Telesat and Loral Skynet and Daniel Goldberg will continue to serve as chief executive officer. Loral and PSP Investments will hold a 64 percent and 36 percent economic interest, respectively, in the new company. Consistent with Canadian law, Loral's total voting equity will be 33.3 percent, with PSP Investments and other Canadian investors having 66.7 percent.

In a statement, Loral and Telesat said the combined Telesat-Loral Skynet company will offer its customers expanded satellite and terrestrial coverage, enhanced back-up advantages and an unparalleled level of customer service.

Loral's satellite fleet provides an array of video and data services primarily outside of North America, and complements Telesat's North American fleet, which hosts strong video and data distribution services across North America, as well as Canada's two premier direct-to-home video services.

The boards of directors of PSP Investments, Loral and BCE have each approved the transaction, which is subject to customary closing conditions, including approvals of the relevant Canadian and U.S. government authorities. The transaction is expected to close by mid-2007.

Michael B. Targoff, chief executive officer of Loral, said the transaction converts Loral's ownership of its current FSS business into a 64 percent economic interest in a premier global provider of satellite services with a large, high-quality backlog, international scope and access to high growth markets.

PSP Investments' president and CEO Gordon J. Fyfe said Telesat's strong customer base and secure backlog are attractive for PSP Investments to acquire and hold, as they complement well PSP Investments' long-term investment time horizon and unique liquidity.

“We have the resources for such transactions and are very pleased to be in a position to acquire this business with our partner Loral. PSP Investments also sees this joint venture as an attractive opportunity to further build Canadian technological presence in this industry and export it worldwide,” he said.

Loral and PSP Investments said they have received debt financing commitments for $2.8 billion (CAD 3.2 billion) from a group of financial institutions led by Morgan Stanley and UBS. In addition, Loral and PSP Investments will provide the new Canadian holding company with cash equity.

Based on the exchange rates used by Loral and PSP Investments in submitting their final proposal, Loral would be contributing $238 million (CAD 271 million) while PSP Investments would contribute $523 million (CAD 596 million), for a total of US $761 million (CAD 867 million).

Recent Stories:

Loral Reports 42% Rise in Revenue to $227-M for 3Q of 2006

MHR Infuses $300-M for Loral’s Expansion

Loral Skynet Aids Global Crossing in Extending FCO Network to Remote Tristan da Cunha Island Community