SoftBank Group Corp. to Capitalize Intelsat with $1.7 Billion
Investment in New Equity to Effect Intelsat Debt Reduction
Combination to Accelerate Strategic Growth Plans for Intelsat and
OneWeb
Transactions Contingent Upon Acceptance by Intelsat Bondholders of
Certain Exchange Offers and Other Closing Conditions
Intelsat to Host Q4 and Full Year 2016 Earnings Conference Call at
8:30 a.m. ET Today
LUXEMBOURG & JERSEY & TOKYO--(BUSINESS WIRE)--Feb. 28, 2017--
Intelsat (NYSE:I) and OneWeb today announced that they have entered into
a definitive combination agreement pursuant to which Intelsat and OneWeb
will merge in a share-for-share transaction. Intelsat and SoftBank Group
Corp. (“SoftBank”) also entered into a definitive share purchase
agreement pursuant to which SoftBank will invest $1.7 billion in newly
issued common and preferred shares of the combined company. Both the
merger and the SoftBank investment are subject to, among other
conditions, successful completion of debt exchange offers to certain
existing Intelsat bondholders as well as receipt of certain regulatory
approvals.
The complementary strengths of Intelsat and OneWeb, combined with the
investment by SoftBank, are intended to create a financially stronger
company with the flexibility to aggressively pursue new growth
opportunities resulting from the explosion in demand for broadband
connectivity for people and devices everywhere.
The debt exchange offers, announced today, together with the proceeds of
the SoftBank investment are intended to reduce Intelsat's debt by
approximately $3.6 billion, assuming the minimum level of participation
in the debt exchange offers is achieved. Either party can terminate the
agreement and SoftBank can terminate its investment if the debt exchange
offers have not been successfully completed within 90 days of the date
of the agreement.
It is expected that, upon the admission of third party limited partners
to the SoftBank Vision Fund, and subject to receipt of all applicable
regulatory approvals, in accordance with SoftBank Vision Fund
agreements, SoftBank's investment position related to the combined
company will be offered to the SoftBank Vision Fund for the purpose of
transferring SoftBank's shares to the SoftBank Vision Fund.
Stephen Spengler, Chief Executive Officer of Intelsat, said, “We believe
that combining Intelsat with OneWeb will create an industry leader
unique in its ability to provide affordable broadband anywhere in the
world. As an early equity investor in OneWeb, we recognized a network
that was a complement to our next-generation Intelsat EpicNG
fleet and a fit with our long-term strategy. By merging OneWeb’s LEO
satellite constellation and innovative technology with our global scale,
terrestrial infrastructure and GEO satellite network, we will create
advanced solutions that address the need for ubiquitous broadband. The
transaction, including SoftBank’s investment, will significantly
strengthen Intelsat’s capital structure and accelerate our ability to
unlock new applications, such as connected vehicles, as well as advanced
services for our existing customers in the enterprise, wireless
infrastructure, mobility, media and government sectors, while also
reducing execution and other risks.”
Greg Wyler, Founder and Executive Chairman of OneWeb, said, “OneWeb has
made incredible technical progress over the past year, and has itself
attracted significant investment from SoftBank. With SoftBank’s support
we will build the world’s first truly global broadband company,
accelerating our mission of bridging the digital divide by connecting
the four billion people without access today. While there are numerous
growth paths available to OneWeb, we are very excited at the prospect of
working with Intelsat on this shared objective.”
Masayoshi Son, Chairman and CEO of SoftBank, said, “We are in the midst
of a technological revolution and, provided we receive the necessary
cooperation from Intelsat bondholders, we welcome the opportunity to
support OneWeb as it creates the foundation for next-generation global
internet services anywhere on the planet. This combination is consistent
with SoftBank’s strategy of investing in disruptive, foundational
technologies that are building the infrastructure for tomorrow, and this
proposal offers a win-win opportunity to accelerate OneWeb’s mission
while enhancing the Intelsat balance sheet.”
If consummated, the combination of Intelsat and OneWeb is expected to
deliver strategic and financial benefits including:
-
Improved Intelsat Capital Structure and Enhanced Financial
Flexibility. Provided minimum levels of participation in the
Intelsat Exchange Offers are attained, the transaction would provide
Intelsat with a clearer path to further and accelerated de-levering
through improved revenue, lower interest expense, and operating and
capital expenditure synergies. The transactions announced today
contemplate reducing Intelsat’s debt to adjusted EBITDA1
ratio from 8.8x today to 6.6x on a pro forma basis.
-
Acceleration of Each Company’s Strategic Growth Plans and
Development of Large, New Markets and Applications. If the
transaction is completed, OneWeb’s low earth orbit (“LEO”)
satellites, combined with Intelsat’s geostationary orbit (“GEO”)
satellites would accelerate the combined company’s strategic growth
plans to offer a truly global and affordable networking solution.
Intelsat’s fully integrated Ku-band infrastructure, coupled with the
combined company’s managed services, has the potential to support the
development of an entirely new and extensive set of mass-market
applications, including for consumer broadband, connected cars,
cellular backhaul, the Internet of Things, and machine-to-machine
communications.
-
Advanced Services for New and Existing Customers. The
combination, if consummated, would bring advanced solutions to current
applications, including enterprise networks, telecommunications
infrastructure for wireless operators and broadband services for the
aeronautical and maritime sectors. Additionally, the combined company
would be able to introduce advanced services for media industry
customers seeking to complement traditional content broadcasting with
over-the-top delivery digital media to fixed and mobile audiences.
Government customers would have access to advanced fixed and mobile
services in support of civilian applications, such as digital
inclusion, as well as assured communications for first response and
emergency services and secured military requirements.
In December 2016, SoftBank announced its commitment to invest $1 billion
in OneWeb to support the technological development and the construction
of the world’s first and only high volume satellite production facility
to further accelerate OneWeb’s vision of delivering affordable,
high-speed, low latency internet to rural and remote communities around
the world. Intelsat was a founding investor in OneWeb, making a minority
equity investment in 2015.
Under the terms of the transactions, SoftBank will acquire a number of
common shares of the combined company, resulting in an approximate 39.9%
voting stake, and an additional number of non-voting preferred shares
for an aggregate cash consideration of approximately $1.7 billion. Any
common shares purchased by SoftBank will be for $5.00 per share in
cash. In the business combination, OneWeb shareholders will receive
Intelsat common shares in exchange for their OneWeb shares. In
aggregate, Intelsat will issue to SoftBank and to OneWeb shareholders
common shares and preferred shares (the preferred shares for this
purpose on an as converted basis) equal in the aggregate to
approximately 800 million shares. Intelsat shareholders will retain the
Intelsat common shares they currently hold.
The combined company will remain domiciled in Luxembourg, and continue
to be listed on the New York Stock Exchange. The combined company,
through its subsidiaries, expects to maintain a significant presence in
the United States, including at OneWeb’s new manufacturing facility in
Exploration Park, Florida, and at Intelsat’s United States facilities in
McLean, Virginia.
The Board of Directors of the combined company will be made up of seven
directors, including three independent directors, three members selected
by SoftBank and one director selected by a current Intelsat shareholder.
Intelsat’s CEO, Stephen Spengler, will be the CEO of the combined
company. OneWeb’s Founder and Executive Chairman, Greg Wyler, will be
the Executive Chairman of the combined company’s Board of Directors.
The combination agreement has been approved by the boards of directors
of Intelsat and OneWeb. Closing of the transactions is subject to
approval by Intelsat and OneWeb shareholders, certain regulatory
approvals and other customary closing conditions. The requisite OneWeb
and Intelsat shareholders have already committed to vote in favor of the
merger and related transactions through the execution of voting and
support agreements. Consummation of the merger and the investment by
SoftBank are cross-conditioned on one another and also subject to the
completion of the Intelsat exchange offers in the 90 days following the
execution of the merger and investment documentation, and other closing
conditions.
The transaction is expected to close late in the third quarter of 2017.
Guggenheim Securities, LLC and Goldman, Sachs & Co. acted as financial
advisors and Wachtell, Lipton, Rosen & Katz and Elvinger Hoss and
Prussen provided legal counsel to Intelsat. PJT Partners acted as lead
financial advisor to OneWeb and also advised SoftBank. Barclays acted as
a financial advisor to OneWeb and rendered a fairness opinion. Morrison
& Foerster LLP, Arendt and Medernech, and Mourant Ozannes provided legal
counsel to OneWeb and SoftBank, and Choate Hall & Stewart LLP and
Milbank, Tweed, Hadley & McCloy provided legal counsel to OneWeb.
Investor Conference Call Details
Intelsat will host an investor conference call at 8:30 am ET today to
discuss this announcement as well as its fourth quarter and full-year
financial results. The webcast and accompanying slides can be accessed
at http://investors.intelsat.com/.
To participate on the live call, participants should dial +1
844-834-1428 from North America, and +1 920-663-6274 from all other
locations. The participant pass code is 48970325. Participants will have
access to a replay of the conference call through March 7, 2017. The
replay number for North America is +1 855-859-2056, and for all other
locations is +1 404-537-3406. The participant pass code for the replay
is 48970325.
This press release does not constitute an offer to purchase securities
or a solicitation of an offer to sell any securities or an offer to sell
or the solicitation of an offer to purchase any new securities, nor does
it constitute an offer or solicitation in any jurisdiction in which such
offer or solicitation is unlawful.
About Intelsat
Intelsat S.A. (NYSE:I) operates the world’s first Globalized Network,
delivering high-quality, cost-effective video and broadband services
anywhere in the world. Intelsat’s Globalized Network combines the
world’s largest satellite backbone with terrestrial infrastructure,
managed services and an open, interoperable architecture to enable
customers to drive revenue and reach through a new generation of network
services. Thousands of organizations serving billions of people
worldwide rely on Intelsat to provide ubiquitous broadband connectivity,
multi-format video broadcasting, secure satellite communications and
seamless mobility services. The end result is an entirely new world, one
that allows us to envision the impossible, connect without boundaries
and transform the ways in which we live. For more information, visit www.Intelsat.com.
About OneWeb
OneWeb’s mission is to enable affordable Internet access for everyone,
to connect all the unconnected schools of the world, and to fully bridge
the digital divide by 2027. OneWeb is building a communications network,
with a constellation of Low Earth Orbit satellites, that will provide
connectivity to billions of people around the world. With more than 10
terabits per second of new capacity, it will extend the networks of
mobile operators and ISP’s to serve new coverage areas, bringing voice
and data access to consumers, businesses, schools, healthcare
institutions and other end users.
About SoftBank Group
The SoftBank Group is a global technology player that aspires to drive
the Information Revolution. The SoftBank Group is comprised of the
holding company SoftBank Group Corp. (TOKYO: 9984) and its global
portfolio of companies, which includes advanced telecommunications,
internet services, AI, smart robotics, IoT and clean energy technology
providers. In September 2016, ARM Holdings plc, the world’s leading
semiconductor IP company, joined the SoftBank Group. To learn more,
please visit www.softbank.com.
Intelsat Safe Harbor Statement
Statements in this news release, including statements regarding the
Tender Offer and the New Debt Financing, constitute “forward-looking
statements” that do not directly or exclusively relate to historical
facts. When used in this release, the words “may,” “will,” “might,”
“should,” “expect,” “plan,” “anticipate,” “project,” “believe,”
“estimate,” “predict,” “intend,” “potential,” “outlook,” and “continue,”
and the negative of these terms, and other similar expressions are
intended to identify forward-looking statements and information.
The forward-looking statements reflect Intelsat’s intentions, plans,
expectations, assumptions and beliefs about future events and are
subject to risks, uncertainties and other factors, many of which are
outside of Intelsat’s control. Important factors that could cause actual
results to differ materially from the expectations expressed or implied
in the forward-looking statements include known and unknown risks. Known
risks include, among others, market conditions and the risks described
in Intelsat’s annual report on Form 20-F for the year ended December 31,
2015, and its other filings with the U.S. Securities and Exchange
Commission and risks and uncertainties related to our ability to
consummate the New Debt Financing and the Tender Offers.
Because actual results could differ materially from Intelsat’s
intentions, plans, expectations, assumptions and beliefs about the
future, you are urged to view all forward-looking statements with
caution. Intelsat does not undertake any obligation to update or revise
any forward-looking statements, whether as a result of new information,
future events or otherwise.
# # #
1.
|
|
In computing Intelsat’s debt-to-Adjusted EBITDA ratio today, we used
the face amount of indebtedness outstanding as of February 28, 2017,
and the Adjusted EBITDA (“AEBITDA”) for the year ended December 31,
2016. In computing the same ratio pro forma for the transactions as
announced today, we assumed that the face amount of Intelsat’s debt
outstanding was reduced by $3.6 billion and assumed no change to the
AEBITDA for the year ended December 31, 2016. AEBITDA is a non-GAAP
financial measure. We have provided a reconciliation of AEBITDA to
Net Income, the most directly comparable GAAP financial measure, as
an annex to this press release. Calculating this ratio using Net
Income in place of AEBITDA, in each case, for the year ended
December 31, 2016, Intelsat’s debt-to-net-income ratio is 14.6 and,
pro forma for the transactions as announced today, would fall to
11.0.
|
|
|
|
# # #
INTELSAT S.A.
UNAUDITED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
($ in thousands)
|
|
Three Months Ended
December 31, 2015
|
|
Three Months Ended
December 31, 2016
|
|
Year Ended
December 31, 2015
|
|
Year Ended
December 31, 2016
|
Net income (Loss)
|
|
$
|
(4,115,321
|
)
|
|
$
|
663,803
|
|
|
$
|
(3,919,453
|
)
|
|
$
|
994,112
|
|
Add (Subtract):
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
220,751
|
|
|
|
243,565
|
|
|
|
890,279
|
|
|
|
938,501
|
|
Gain on early extinguishment of debt
|
|
|
(7,061
|
)
|
|
|
(679,130
|
)
|
|
|
(7,061
|
)
|
|
|
(1,030,092
|
)
|
Provision for income taxes
|
|
|
6,100
|
|
|
|
4,449
|
|
|
|
1,513
|
|
|
|
15,986
|
|
Depreciation and amortization
|
|
|
173,667
|
|
|
|
174,023
|
|
|
|
687,729
|
|
|
|
694,891
|
|
EBITDA
|
|
|
(3,721,864
|
)
|
|
|
406,710
|
|
|
|
(2,346,993
|
)
|
|
|
1,613,398
|
|
Add (Subtract):
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
4,710
|
|
|
|
5,194
|
|
|
|
26,235
|
|
|
|
23,222
|
|
Non-recurring and other non-cash items
|
|
|
4,258
|
|
|
|
5,486
|
|
|
|
9,877
|
|
|
|
14,050
|
|
Impairement of goodwill and other intangibles
|
|
|
4,165,400
|
|
|
|
-
|
|
|
|
4,165,400
|
|
|
|
-
|
|
Adjusted EBITDA
|
|
$
|
452,504
|
|
|
$
|
417,390
|
|
|
$
|
1,854,519
|
|
|
$
|
1,650,670
|
|
|
|
|
|
|
|
|
|
|
Note:
Intelsat calculates a measure called Adjusted EBITDA to assess the
operating performance of Intelsat S.A. Adjusted EBITDA consists of
EBITDA as adjusted to exclude or include certain unusual items, certain
other operating expense items and certain other adjustments as described
in the table above. Our management believes that the presentation of
Adjusted EBITDA provides useful information to investors, lenders and
financial analysts regarding our financial condition and results of
operations, because it permits clearer comparability of our operating
performance between periods. By excluding the potential volatility
related to the timing and extent of non-operating activities, our
management believes that Adjusted EBITDA provides a useful means of
evaluating the success of our operating activities. We also use Adjusted
EBITDA, together with other appropriate metrics, to set goals for and
measure the operating performance of our business, and it is one of the
principal measures we use to evaluate our management’s performance in
determining compensation under our incentive compensation plans.
Adjusted EBITDA measures have been used historically by investors,
lenders and financial analysts to estimate the value of a company, to
make informed investment decisions and to evaluate performance. Our
management believes that the inclusion of Adjusted EBITDA facilitates
comparison of our results with those of companies having different
capital structures.
Adjusted EBITDA is not a measure of financial performance under U.S.
GAAP, and our Adjusted EBITDA may not be comparable to similarly titled
measures of other companies. Adjusted EBITDA should not be considered as
an alternative to operating income (loss) or net income (loss),
determined in accordance with U.S. GAAP, as an indicator of our
operating performance, or as an alternative to cash flows from operating
activities, determined in accordance with U.S. GAAP, as an indicator of
cash flows, or as a measure of liquidity.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170228005825/en/
Source: Intelsat
Investors:
Intelsat
Dianne VanBeber,
+1-703-559-7406
Vice President, Investor Relations and Corporate
Communications
dianne.vanbeber@Intelsat.com
or
Media:
Intelsat
Dianne
VanBeber, +1-703-559-7406
Vice President, Investor Relations and
Corporate Communications
dianne.vanbeber@Intelsat.com
or
Teneo
Strategy
New York
Bethany Sherman, +1 917-373-6465
Bethany.sherman@teneostrategy.com
or
London
Paul
Durman, +44 20 7186 8890
Paul.durman@teneobluerubicon.com
or
OneWeb
Sard
Verbinnen & Co
San Francisco
Paul Kranhold / Megan
Bouchier, +1 415-618-8750
or
New York
Jim Barron / Ben
Spicehandler, +1 212-687-8080
SoftBank-SVC@sardverb.com
or
SoftBank
Group
Japan:
SoftBank Group Corp. Corporate Communications
+81.3.6889.2300
sbpr@softbank.co.jp
or
United
States:
Sard Verbinnen & Co
SoftBank-SVC@sardverb.com
or
San
Francisco
Paul Kranhold / Megan Bouchier, +1 415-618-8750
or
New
York
Jim Barron / Ben Spicehandler, +1 212-687-8080