INDUSTRY EXPERTS QUESTION PANAMSAT INTEREST IN EUTELSAT
PanAmSat purchase of Eutelsat could complicate EchoStar’s plan to take over DirecTV and further consolidate satellite industry, analysts and industry officials say. Wall St. Journal reported PanAmSat and Intelsat had made separate pitches for Eutelsat. No agreements have been reached and talks reportedly still are in preliminary stages, sources said. Intelsat reportedly has offered $3.5-$4 billion. PanAmSat has yet to make formal bid, report said, but it has war chest of $1 billion, which could “make bidding easier,” satellite analyst said. Talks between PanAmSat and Eutelsat are just beginning, Journal said.
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Acquisition by either PanAmSat or Intelsat (CD Feb 6 p6) would further consolidate industry and create megasatellite operator that would rival SES Global. PanAmSat would have 38 satellites and nearly $1.7 billion revenue after deal, Intelsat 39 satellites and nearly $1.8 billion. PanAmSat- Eutelsat combination would mean company would add 1,200 TV and 600 radio channels to 98 million homes in Europe if regulators approved deal. SES has 29 satellites and $971 million in annual revenue after acquiring GE Americom in April 2001 for estimated $2.7 billion in cash and 15.4 million shares of stock (CD March 29 p3). Eutelsat, PanAmSat, Intelsat and EchoStar refused comment. “We're not commenting on rumors, but it’s very safe to assume that PanAmSat wouldn’t do anything that would have an adverse effect” on EchoStar deal, Hughes spokesman said: “We're entirely committed to getting the merger done.”
PanAmSat purchase of Eutelsat “could be handicap” to EchoStar, satellite analyst for law firm that represents one of companies involved told us: “It’s an odd situation in the middle of a merger.” Combined with existing review, “the final decision could be delayed further,” he said:. “It could blow up the entire merger.” Without knowing for sure, analyst said he could see why EchoStar Chmn. Charles Ergen “might be cheering PanAmSat on” because of assets involved. He said GM wouldn’t benefit because purchase of Eutelsat and spinning it off wouldn’t give it cash it coveted. At that point, “it would be too large to buy,” analyst said: SES may have been likely suitor, but both companies have substantial business in Europe and SES would “never get Brussels” to give regulatory approval. Analyst said Intelsat was logical buyer because “cultures of the 2 organizations are very similar.”
GM and PanAmSat “may see the writing on the wall” and could be “looking for an out” to protect themselves, said satellite attorney who represents EchoStar rival: “They have to realize that the odds are heavily stacked against them” on deal. Key to interest may be Ergen, satellite attorney for large global operator told us. “This deal can only go forward with Ergen’s support,” he said. Possibilities are that PanAmSat is “playing around” with sale “to learn more about Eutelsat and the satellite market, or it’s a way to drive the price up” for Intelsat. Other possibility is that “the report in the Wall St. Journal is wrong.” Bottom line is that Ergen has to know what’s going on, attorney said: “This deal fits better with PanAmSat because of their transatlantic compatibility.”
“I really don’t question the sincerity of PanAmSat,” satellite consultant Leslie Taylor told us: “It’s about who’s got the money.” She said “more consolidation of the satellite industry” wouldn’t be surprising, but “it’s less likely that PanAmSat” would be involved in sale “because of pendency” of EchoStar-DirecTV deal. However, she said PanAmSat purchase of Eutelsat “does more for them that it does for Intelsat because they have a more complementary business.”
“Consolidation is always on the books” in satellite business, satellite analyst for law firm that represents one of companies involved told us: “You can either buy a midsize operator in Asia or Latin America or get the whole enchilada. Eutelsat will buy you a lot of assets, but when you go after the big boys you can have competition or antitrust concerns.” Analyst Roger Rusch said he “doubts PanAmSat has the financial power or deep determination to pull off a purchase of Eutelsat.”