Loral Space & Communications Inc (LORL.O) has hired boutique investment bank Perella Weinberg Partners to advise its independent directors as it explores a potential sale of the company, people close to the matter said on Monday.
Reuters reported in January that Loral, which holds a majority stake in Canadian satellite communication services company Telesat Holdings Inc, is working with Credit Suisse Group AG (CSGN.VX) to find a buyer.
The company’s top shareholder is playing a key role in any sale process, and independent members of Loral’s board separately hired Perella in recent weeks to advise them because of the possibility of conflicts, according to people who spoke on the subject but asked not to be named because the matter is not public.
Representatives for Loral and Credit Suisse did not immediately respond to requests for comment. Perella declined to comment.
Loral shares rose 1.6 percent to US$80.30 on the New York Stock Exchange on Monday.
Loral’s biggest shareholder is hedge fund veteran Mark Rachesky‘s MHR Fund Management LLC, which held 38 percent of Loral’s outstanding voting common stock as of December. Rachesky, who co-founded MHR in 1996 after working for activist investor Carl Icahn for six years, is seen as key to Loral accepting any takeover offer.
TWO-STAGE SALE PROCESS
Loral, which has a market value of around US$1.7 billion, draws the bulk of its value from Telesat, holding a 62.8 percent economic interest but only 33.3 percent of its voting stock.
Canada’s Public Sector Pension Investment Board (PSP) has a 35.3 percent economic interest and 66.7 percent of the voting power, according to regulatory filings.
Because of the complicated ownership, an auction would effectively be structured as a two-stage process in which Loral will first shortlist bidders from a group of interested parties, who will then negotiate a deal with PSP, people familiar with the matter said.
Loral is expected to draw up a shortlist after receiving first-round bids in the middle of March, the people said.
Parties that have expressed preliminary interest include private equity firms Carlyle Group LP (CG.O), KKR Co & LP (KKR.N), Apax Partners and Onex Corp (OCX.TO), as well as the Canada Pension Plan Investment Board and the Ontario Teachers Pension Plan, several people said.
Representatives for those parties either declined to comment or did not immediately respond to requests for comment.
A buyer seeking control of Telesat would need PSP’s agreement. The Canadian pension fund manager is being advised by Morgan Stanley (MS.N) on options for its stake in Telesat, Reuters has reported previously.
Loral and PSP jointly explored the sale of Telesat to other companies in the sector and private equity firms three years ago, seeking as much US$7 billion, but could not agree on a price.
This time, Loral is looking to sell itself, rather than only its stake in Telesat, partly to avoid a big tax bill, according to people familiar with the matter. If Loral were to sell its Telesat stake, both the company and its shareholders would be subject to taxes on the proceeds.
With headquarters in Ottawa, Telesat is the world’s fourth-largest provider of fixed satellite services, behind Intelsat Global SA, SES SA SESFg.LU and Eutelsat Communications SA (ETL.PA), according to the company’s latest annual report.
Loral and PSP acquired Telesat in 2007 for US$3.42 billion from one of Canada’s major phone companies, BCE Inc (BCE.TO). In 2012, Loral sold its space systems subsidiary to MacDonald, Dettwiler and Associates Ltd (MDA.TO), leaving Telesat as Loral’s main asset.
(Reporting by Soyoung Kim and Nicola Leske in New York; Editing by Chizu Nomiyama, Peter Galloway and Dan Grebler)
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