Telesat Said to Seek Buyers, Sale May Bring Up to $7 Billion

Canadian satellite firm Telesat Holdings Inc. hired three financial advisers to help sell the company for $6 billion to $7 billion, said three people with knowledge of the matter.

Closely held Telesat brought in JPMorgan Chase & Co., Morgan Stanley and Credit Suisse Group AG on Nov. 17 to start a formal sales process and offer so-called staple financing to interested buyers, said the people, who asked not to be identified because the talks are private.

While an auction hasn’t officially begun, Ottawa-based Telesat has been approached by Intelsat SA, the people said. Intelsat, owned by private-equity funds BC Partners Ltd. and Silver Lake, has hired Bank of America Corp. as an adviser and may name others to pursue a bid, one of the people said.

Telesat is co-owned by New York-based Loral Space & Communications Inc. and Canada’s Public Sector Pension Investment Board. Telesat calls itself the world’s fourth- largest satellite company.

A purchase by Intelsat would create “by far the largest telecommunication-services provider” in the world, said Marco Caceres, a satellite-market analyst at consultant Teal Group in Fairfax, Virginia. Intelsat has a “large fleet of satellites and may be looking to buy orbital slots owned by Telesat,” he said.

The sale may fetch 8.5 times to 9.5 times Telesat’s projected earnings before interest, taxes, depreciation and amortization of about $700 million next year, said one of the people. Telesat is being advised by JPMorgan, while Loral, a designer and maker of satellites, is working with Credit Suisse and the pension fund is being represented by Morgan Stanley.

Telesat’s Owners

Loral owns 64 percent of Telesat and has 33 percent of the voting rights. The Canadian pension board owns the remaining 36 percent and has majority voting control. They agreed to buy Telesat in late 2006 for C$3.25 billion ($3.19 billion) and merged Loral’s satellite business into Telesat.

Wendy Lewis, a Loral spokeswoman, declined to comment on Telesat while saying that JPMorgan and Credit Suisse are acting as advisers on a possible spinoff or sale of Space Systems/Loral, Loral’s other major division.

Spokesmen for JPMorgan, Credit Suisse and Morgan Stanley didn’t return calls. Nick Mitsis, a spokesman for Luxembourg- based Intelsat, didn’t immediately return a phone call or respond to an e-mail. Bank of America couldn’t be reached.

Foreign Ownership

Loral advanced $11.48, or 17 percent, to $79.23 yesterday in Nasdaq Stock Market trading, the biggest jump since April 2, 2009. The shares have almost tripled in the past year.

Many of the prospective buyers for Telesat are from outside Canada, raising the possibility of official opposition. On Nov. 3, Prime Minister Stephen Harper’s government blocked a $40 billion bid by Australia’s BHP Billiton Ltd. for Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer company.

Canada lifted restrictions on foreign ownership of domestic satellite companies in July, implementing a measure included in Finance Minister Jim Flaherty’s March budget.

Under the Investment Canada Act, the government can block any transaction valued at C$299 million or more if it finds the deal doesn’t provide a “net benefit” to the country.

After Canada blocked BHP’s bid for Potash, Harper said his government would give more clarity on foreign ownership restrictions. Industry Minister Tony Clement, who is responsible for any review, said Nov. 16 that the guidelines will be issued before year-end. Clement declined to comment on the implications of a possible transaction involving Telesat.

Loral said Nov. 4 that Telesat’s board was exploring strategic options, including an initial public offering, and that a review also was under way for Space Systems/Loral.

Telesat generated revenue of $593 million for the first nine months of 2010, according to Loral’s third-quarter earnings release, and Ebitda of $450 million.

To contact the reporters on this story: Jeffrey McCracken in New York at jmccracken3@bloomberg.net; Cristina Alesci in New York at calesci2@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net

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