The private equity buyers of Inmarsat refused to bow to shareholder pressure and increase their $3.4bn bid for the U.K. satellite company on Monday, just one day before a scheduled court hearing to approve the deal.
The buyout consortium, which includes Apax Partners, Warburg Pincus, Canada Pension Plan Investment Board and Ontario Teachers’ Pension Plan Board, has been under pressure from several hedge funds to raise its offer and delay the court hearing.
Oaktree Capital Management, which is led by billionaire Howard Marks and owns 2.85% of ISAT, -0.07% spoke out against the takeover in November, saying that the bid “significantly” undervalued the FTSE 250-listed company.
The Los Angeles-based asset manager argued the satellite operator could be worth at least $300m more if U.S. regulators give the go-ahead to Virginia-based Ligado Networks to build a 5G service. Ligado, a satellite communications business, has an agreement in place with Inmarsat to lease spectrum from the U.K. company.
Oaktree’s action has been backed by rival hedge funds Rubric Capital Management and Kite Lake Capital Management.
Oaktree first raised the issue of the value of the Ligado contract in May when it voted against a scheme of arrangement — a takeover mechanism that only needs approval from 75% of shareholders. Almost 80% of Inmarsat shareholders backed the deal, which now needs court approval to make the bid unconditional. The court hearing has already been rescheduled from November 12 to December 3.
In a statement to the London Stock Exchange, the buyout consortium said there has been no change in relation to Ligado obtaining a license since it launched the scheme in April. It pointed out that its all-cash $7.21-a-share offer represents a premium of 46% to the closing price of Inmarsat’s shares on January 30 — the day before it submitted its bid.
Shares in Inmarsat were trading slightly lower at 542p at 10.30am on December 2 in London.
However, the U.S. Secretary of Defense Mark Esper urged federal regulators last month to deny Ligado’s proposal to build a satellite terrestrial mobile network, citing risks to global positioning systems and military operations.
The buyout of Inmarsat has had to overcome several obstacles. The U.K. government intervened in the deal in July because of national security concerns. Inmarsat provides a large chunk of its satellite products to the U.S. government and military.
Inmarsat made a series of legally binding commitments that include keeping a substantial part of the engineering workforce and the network operations center, which controls its fleet of satellites, in the U.K. In October, the U.K. government gave the green light to the buyout.