The planned $3.1 billion takeover of satellite operator Intelsat Ltd. could be in jeopardy after an electrical problem ruined one of the company’s satellites on Sunday.
But the buyers may be more likely to renegotiate the terms of the deal than walk away from a prized asset, some industry analysts said.
The loss of the satellite means private equity group Zeus Holdings Ltd. has the right to pull out of the deal, Bermuda-based Intelsat said.
Intelsat’s woes mirror problems recently suffered by satellite operator PanAmSat Corp., which saw a satellite spoiled by technical problems on the eve of an acquisition. PanAmSat’s controlling shareholder, DirecTV Group Inc., agreed to sell its stake for 7 percent less to cover the cost of the satellite failure.
“Based on what we saw with PanAmSat, you might just see them alter the terms (of the Intelsat deal) but not walk away,” said one industry analyst.
Intelsat’s buyer -- a group formed by private equity firms Apax Partners, Permira, Apollo Management and Madison Dearborn Partners -- was evaluating the impact of the satellite’s failure, Intelsat said.
The buyout firms could not be immediately reached for comment.
The planned purchase of Intelsat, which acts primarily as a long-distance carrier for telecom companies and runs a private line between the White House and the Kremlin, is just one of several satellite deals this year by private equity firms.
Buyout firm Blackstone agreed in June to buy Netherlands-based New Skies Satellites, a smaller operator, for $956 million.
Goldman Sachs Capital Partners 2000, an investment partnership affiliated with Goldman Sachs, bought an 15.8 percent stake in Paris-based Eutelsat for about $675 million.
Intelsat said an electrical malfunction hit its Americas-7 satellite. The company said it was working with manufacturer Space Systems/Loral to determine the cause of the problem.
The satellite, launched in September 1999, covered the United States, Canada, Central America and parts of South America. Intelsat said it had insured the equipment.
Intelsat currently has 23 satellites in orbit, and it leases capacity on two additional satellites owned by other satellite operators in the Asia-Pacific region, according to a regulatory filing by the company earlier this year.
The March 2004 filing said the Americas-7 satellite’s in-orbit operations was covered under an insurance policy due to expire in September 2004, for an amount in excess of its current net book value.
It was not clear whether Intelsat obtained replacement insurance when the coverage expired. The company was not immediately available to comment.
Even when there is in-orbit insurance, the filing said, the coverage would not protect against all losses, such as those resulting from acts of war and other factors.
Intelsat’s three largest shareholders are Lockheed Martin Corp. with a 24 percent stake; Tata Sons of India with a 5.4 percent stake, and France Telecom with a 5 percent stake.
