Four private equity firms plan to buy Bermuda-based Intelsat for about $3 billion, the world’s second-largest satellite operator said on Monday.
Bermuda-based Intelsat, which carries voice, video and data traffic, became the third satellite company this year to fall into the hands of buyout firms after Apax Partners, Permira, Apollo Management and Madison Dearborn Partners sealed the transaction on Sunday night.
The private equity firms formed a consortium called Zeus Holdings Ltd. to buy the satellite company for an expected price per share of $18.75. The consortium will also assume Intelsat’s $2 billion of debt.
Intelsat said it expects the deal to close as early as the end of this year.
“The (four firms’) view is that the market has reached a bottom and that the prices (satellite operators) charge customers have fallen enough due to overcapacity in the industry,” said one person involved in the deal.
Private equity firms are also attracted by satellite companies’ cash-flow potential, which allows them to take on a significant amount of debt to finance the transaction.
Intelsat’s three largest investors are Lockheed Martin with a 24 percent stake, Tata Sons Ltd. of India with 5.4 percent and France Telecom with 5 percent.
Permira and Apax declined to comment while Apollo, Madison and was not immediately available to respond.
The deal, which is expected to be announced later on Monday, comes after Kohlberg Kravis Roberts & Co. agreed in April to purchase DirectTV Group’s controlling stake in PanAmSat and to sell 27 percent holdings each to Carlyle Group and Providence Equity Partners.
The price of the deal was revised down to $3.35 billion from $3.55 billion last week.
U.S.-based private equity firm Blackstone agreed in June to buy Netherlands-based New Skies Satellites, a smaller operator, for $956 million.
Intelsat has attempted in vain to float at least three times over the past three years and failed to acquire Paris-based rival Eutelsat in 2002.
The expected price of $18.75 is well above the proposed flotation price of $12 to $14, announced by the company in March before it shelved its IPO plan in May.
Intelsat was set up as a multi-governmental organisation in 1964 amid the Cold War, seven years after Russia’s Sputnik --the first satellite -- was propelled into orbit.
Primarily a long-distance carrier for telecom companies, Intelsat also runs a private line between the White House and the Kremlin.
Apollo and Madison Dearborn first competed against each other in the bidding to buy the satellite company, but later joined forces, people close to the deal said.