Televisa Eyes Satmex

 

Last week, Rocco pointed in the comment threads to a Wall Street Journal (subscription required) report that Intelsat may be for sale. As Rocco so succinctly put it in the comments:

FOR SALE: Global communications satellite business. Only $11 billion in debt. Good cash flow. Nice office in Bermuda; half-empty building in Washington. Heavy regulatory environment. Price: $6 billion.

We wrote a bit about Intelsat’s history in this post; the Wall Street Journal’s report  (here) has more details on Intelsat’s recent history as a private entity.

Yet Intelsat isn’t the only satcom firm in the midst of (possibly) changing hands. Asiasat yesterday asked to have their stock trading suspended due to a pending announcement, and now come reports that Satmex, too, may be in the sites of a takeover entity.

Variety reports: 

MEXICO CITY — Mexican conglom Televisa is hooking up with the Chinese. VP of broadcasting Jose Baston signed an agreement to distrib state broadcaster CCTV’s international feed in Mexico on Monday. Televisa execs will travel to China in the coming weeks to explore sales of telenovelas and formats to that country…

Net also is considering bids for Endemol and Mexican satellite firm Satmex as possible destinations for its bulging cash reserves.

With Satmex in its fold, Televisa could cut its own international distribution costs as well adding revenue from Satmex’s three birds that cover the American continents. Global sat firms such as PamAmSat also are expected to go after Satmex.

Business News America has greater detail on Televisa’s thinking behind a Satmex buyout:

 Televisa is analyzing what sorts of operational synergies exist between its own operations and Satmex’s coverage, according to de Angoitia….

However, Alberto Moreno, an analyst with corporate ratings firm Fitch Ratings México, downplayed the news saying that it is just one of many investment options that Televisa is weighing up and that it is too early to tell whether the company is a serious contender.

If the company is indeed seriously interested, an official announcement should be made in the short term, Moreno told BNamericas.

Despite the uncertainty, Moreno said that Televisa is looking for new investment opportunities to grow their business particularly to address the US Hispanic market.

 

Satmex has decent coverage of the Americas with only three satellites. Although Televisa’s recent sale of its stake in Univision was big news, it’s clear from the Satmex reports that Televisa’s interest in the growing U.S. Hispanic market is far from over.

 

 

3 Comments

  • Rocco Fanucci says:

    Buying SatMex will cost between $350 and $900 million (U.S.). Wild range of estimates there, captain!

    Three satellites, 2 old and/or sick, and only $47 million in EBITDA, according to Inside Satellite TV (subscription):

    It seems every major satellite operator on the planet is involved in the bidding process for Mexico s SatMex, and in the process pushing any acquisition price to record levels. Not bad for a business that only emerged from bankruptcy six months ago. SatMex is carrying debt of $378m.

    We also have a set of situations running in parallel that might influence where SatMex finally ends up. Intelsat is in the news (again) this time with Blackstone said to be looking to pay $6bn for Intelsat, buying the asset from the Zeus consortium and giving Zeus a healthy profit on exit. Intelsat is widely acknowledged to be involved in the bid for SatMex, along with Eutelsat/Hispasat, SES, Telesat/Loral and Brazil s Star One (owned by a Mexican-GE consortium). Additionally, a handful of local Mexican entrepreneurs have declared they ll be bidding. These include Telmex (the same people who control Star One), and perhaps Televisa (reportedly in a joint bid with Eutelsat), and others.

    Morgan Stanley, running the sale, describe the business as providing a  unique  entry point to the Americas and few would argue with that. But any buyer is going to end up paying for the  jam tomorrow  part of the business, because the current assets are generating only $42.7m-worth of EBITDA from its 3 satellites last year. Considerable investment will be needed over time to buy new satellites to replace two (of the 3-satellite fleet) that are badly ailing.

    A glimpse into SatMex 5′s problem was caught by Sat ND in 2004:

    Satmex V on 13 October [2004], 1053 UTC, suffered positioning problems ("una anomalía de posicionamiento") which caused a temporary interruption of some of the services provided by the satellite.

    Satelites Mexicanos said in a press release that the satellite had gone into "self-protect mode" ("modo de autoprotección") before. The company was taking "measures to rectify the problem." However, the statement also said the cause of the problem was unknown.

    In a message to its customers, Satmex said that it "completed the pointing correction maneuvers of SatMex 5 and gradually re-established services in all of its transponders" the same day. It said it had "no information that suggests any satellite hardware damage, or a shortening of its expected useful life and service capability."

    And Solidaridad 2, nearing the end of its design life in 2008, doesn’t have much video traffic on it.

  • Anonymous says:

    Via Latin Finance (subscription):

    Global satellite operators and local industrialists this month have the chance to buy Satelites Mexicanos (Satmex), Mexico’s largest satellite company, four years after it went bankrupt and stopped paying on $743 million in debt. The fast turnaround looks likely to reward bondholders who stuck with the process, and also boost confidence in the new bankruptcy regime.

    The floor price for Satmex is set at $500 million and advisor Morgan Stanley has sent out invites to 40 potential bidders. "Despite a capitalization of $500 million, the company still has too much debt and its long term future will depend on new investments," says Thomas Heather, the conciliator for Satmex between government agencies, shareholders and creditor groups since May 2005, and an attorney at White & Case in Mexico City.

    At least 10 entities ranging from large satellite companies to wealthy Mexican individuals have submitted bids, according to people close to the transaction. They include satellite operators Intelsat, SES Global Brazil’s StarOne – owned by Carlos Slim – and France’s Eutelsat.

    Magnates in the mix include billionaire Moises Saba, a former shareholder in mobile phone company Unefon, and Miguel Aleman, grandson of a former president. Clemente Serna and Alejandro Burillo, two local communications industrialists are also competing, probably with one of the global players. Since the company must, by law, be majority owned by Mexican nationals, the winning bid is likely to come from a consortium.

    This ownership restriction could cap the price as the global trend is for private equity firms to buy satellite operators, which have solid cash flow and can be loaded up with debt. For example, Intelsat is owned by Madison Dearborn, Apax, Permira and Apollo, while SES Global’s largest shareholder is GE Capital, with a 20% stake. Intelsat is the world’s largest satellite operator with 51 units in the sky.

    Deep Pockets

    Whoever buys Satmex will need deep pockets as it is still highly leveraged, with $368 million in high yield bonds outstanding, or 7.6 times projected Ebitda for 2007. It is also in danger of losing a satellite position unless it can occupy one of its assigned slots by March 2008. Satellite positions are assigned to countries by international bodies and leaving a position open for more than five years can result in a loss. Satmex’s new owner will probably have to commit to launching a satellite by then, a measure complicated by the fact that they take two years to build and launch. This makes it likely that one of the large satellite players will be among the winners, as they all have units under construction.

    The positions its satellites can occupy, along with the recently launched Satmex 6, are the company’s main assets. It has a footprint that covers the entire American continent from Alaska in the north to Tierra del Fuego in the south, including Hawaii. Space is increasingly crowded and since some satellites only cover certain areas, they are of differing value.

    Building and launching a new satellite can cost as much as $400 million. Satmex’s other orbiting satellite, Solidaridad II, only has 6-12 months of operation left, although it could keep holding the slot for another four years after that without generating income. It would not have to be replaced for almost a decade although an aggressive buyer may wish to do that.

    The company’s main clients are cable companies, although management believes it may be possible to increase broadband internet services with cheaper technologies. Newer satellites have better technology for internet access by using different spectra.

    Satmex may never rival global giants like Intelsat. However, it has a solid niche and could be a profitable operation. "A small regional operator can be a good little business. If the debt can be managed there is no reason Satmex cannot survive," says Patrick French, senior analyst at Northern Sky Research. "And its satellites are right in the middle of the US cable arc."

    Political Uncertainty

    Bondholders, who now own 78% of the company, will be hoping the sale goes smoothly although there are concerns. In February 2007 a congresswoman sprung a new telecommunications law on legislators that proposed barring private equity firms from the process and restricting it to Mexicans with experience in satellite communications. This would have limited the field to four: Slim, Emilio Azcarraga, Ricardo Salinas-Pliego and Clemente Serna.

    Heather stopped the law going through by fierce lobbying in Congress. But there are still pressures politicians may be unable to resist. "The proposed requirements would have generated barriers to entry to investment and in the management in direct contravention of the Foreign Investment Law and various international treaties," says Heather.

    Nonetheless, the sale is proceeding smoothly. Throughout April, potential investors accessed the information center for more detailed operational and financial data. In May, bidders will submit financial statements and technical accreditations as well as a proposed share structure and business plan. The transport and communications ministry will approve bids and the highest will win the company at the end of May.

    Barring further complications, the process will have been remarkably quick by Mexican standards as bankruptcy proceedings under the new law only began in 2005. Bondholders should get a much better deal this time, depending on the final sale price. A successful sale at a good price could result in a complete change in investor perception about the risks of investing in Mexico

  • Rocco Fanucci says:

    Via Satellite Finance (subscription):

    The deadline for bids for Mexican satellite operator Satmex has been extended by around two weeks to May 30 as it seeks to answer queries from potentials buyers. A SatelliteFinance source said that the complex nature of Satmex’s debt profile and creditor ownership, following its emergence from chapter 11 bankruptcy, has meant that potential bidders are being particularly vigilant. In addition, bidding consortiums were still in the process of being put together, with the deadline for their formation now thought to be May 21.

    The major reason for this seems to be the need to form a joint bid to satisfy Mexican state ownership requirements. As with the Loral Telesat deal and the Canadian government, the Mexican government requires that while majority ownership can be held by a foreign company, voting control cannot. As such, a Mexican partner is required by interested foreign bidders and to that end the bid consortiums are beginning to take shape.

    Eutelsat is believed to have lined up Miguel Aleman, a former shareholder in Mexican broadcaster Televisa, as its bidding partner. Telmex, the Mexican telecoms incumbent owned by telecom tycoon Carlos Slim, is understood to have aligned with AT&T and GE Capital. Intelsat, which is still in the running although could be somewhat preoccupied with its own sales process, is rumoured to have been in talks with Grupo Pegaso, the two have previously worked together on PanAmSat de Mexico and Mexican two-way broadband satellite player Pegaso Banda Ancha.

    The other two major satellite operators believed to be bidding are Telesat – Loral and SES. According to some sources, SES may well bid via QuetzSat, its joint venture with Grupo Medcom. Citigroup has been rumoured to be providing the financing for a potential deal. A potential partner for Loral may be broadcaster Televisa, whose executive vice president Alfonso de Angoitia recently said in a conference call on the company’s Q1 2007 that Televiso was studying the potential synergies that could be gained from a merger between the two.

    While non-binding bids from interested parties were made back in early March a number of firms have since carried out due diligence and official bids were initially due by May 10 with final bids required a week later. Following the May 31 deadline for final bids, a three-person sub-committee of Satmex’s board and made up of representatives of the Satmex creditors, in particular its US bondholders, will evaluate the offers and make a recommendation to the rest of the board.

Leave a Reply


five + = 11