Hedge funds drop challenge to $3.4 billion takeover of Inmarsat

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Three hedge funds have dropped their attempt to challenge the acquisition of Inmarsat, paving the way for the $3.4 billion takeover of the U.K. satellite company by a U.S. private equity consortium.

The move comes a day after the bidders, which include Apax Partners, Warburg Pincus, Canada Pension Plan Investment Board and Ontario Teachers’ Pension Plan Board, said they would not raise their offer for Inmarsat ISAT, +0.52%.

Billionaire Howard Marks’ Oaktree Capital Management, Rubric Capital Management and Kite Lake Capital Management previously wanted a U.K. court to delay the takeover because they claimed the bid didn’t reflect the value of Inmarsat’s contract with Ligado Networks, a U.S. broadband company that licenses some of the satellite company’s airwaves.

Oaktree, which owns 2.85% of Inmarsat, had argued that the satellite operator could be worth at least $300m more if U.S. regulators give the green light to Ligado to build a 5G service, which would trigger a payment to Inmarsat.

However, last month, Inmarsat, which provides a large chunk of its satellite products to the U.S. government and military, said the prospect and timing of any revenue from its Ligado contract was uncertain.

In a statement to the London Stock Exchange on Tuesday, the hedge funds said: “Having considered our position carefully, we now no longer intend to raise objections to the scheme being sanctioned at the hearing.”

Their retreat means the takeover of FTSE 250-listed Inmarsat can now be approved at a court meeting scheduled for Tuesday and Wednesday. Under a scheme of arrangement, Inmarsat only needs approval from 75% of shareholders for the deal to go through. In May, almost 80% of Inmarsat shareholders backed the takeover.

Shares in Inmarsat were slightly higher at 543.8 pence a share in London morning trading, valuing the satellite company at almost £2.6 billion.

The deal is the latest in a string of U.K. company takeovers by foreign bidders which have taken advantage of a weak pound to buy undervalued companies. There have been nine take-private deals in the U.K. this year with an aggregate deal value of $12.9bn, according to data provider Preqin.

It is also the second takeover of a British company in recent months to attract the attention of the U.K. government, which intervened in the deal in July because of national security concerns.

The government in November waved through the £4 billion takeover of Cobham COB, -0.13% by Advent International after the U.S. buyout group agreed to strengthen security arrangements around sensitive sites and inform the Ministry of Defence if it plans to sell all or part of the U.K. aerospace and defense supplier.