On Monday, Permira agreed to buy Asia Broadcast Satellite. The PE firm will have roughly 70% of ABS while management will have the rest, a person familiar with the deal says. The sellers include Citi Venture Capital International and ADM Capital.
The transaction, valued at more than $200 million, is expected to close by the end of the year, probably by October or November.
ABS, which has its operational headquarters in Hong Kong, was founded in 2006. It operates three satellites in orbit under the ABS brand and one under a co-brand with a third party. Another two satellites are in the pipeline. ABS targets fast-growing markets in Asia, Russia, Africa and the Middle East. No job cuts or management changes are expected.
“ABS is one of the world’s fastest growing satellite operators, with prime orbital locations serving markets with strong fundamentals,” Richard Sanders, head of TMT at Permira, said in a statement.
Permira’s investment in ABS comes from its fourth fund, which raised 9.6 billion Euros in 2006.
The ABS auction began in March and Permira began exclusive talks to buy the firm in August, a source says. Citi advised ABS while Permira did not use an outside financial advisor.
The deal is the latest satellite acquisition for Permira. Previously, Permira, along with other buyout shops, acquired Intelsat in 2005 and Inmarsat in 2003. PE firms in general have been avid buyers of satellite companies. Blackstone acquired New Skies Satellites in 2004 for $956 million and took it private. KKR bought PanAmSat in 2004 and then launch an IPO of the firm less than a year later. Intelsat, when it was owned by Permira and several other PE shops (KKR, Providence Equity and Carlyle Group), then bought PanAmSat for $3.2 billion in 2005. Permira has exited both Intelsat and Inmarsat.
So what’s the interest in satellites? Well, satellites are a key part of telecommunications infrastructure and can reach areas where fiber cannot. ABS, for instance, beams to Africa and the Middle East, regions that would be a hard reach for fiber. “The Middle East, like Afghanistan, has terrain that is very hard to navigate, so there are real issues with putting down fiber,” the source says. “It would take a lot of manpower and investment to do it.”
Many satellite firms were also government-owned and very bureaucratic businesses that weren’t well managed, the source says. This makes them prime candidates for PE takeovers.