Each GeoEye share will be exchanged for either 1.137 shares of DigitalGlobe common stock and $4.10 in cash, $20.27 in cash or 1.425 shares of stock, the companies said in a statement today. The premium is 34 percent more than Herndon, Virginia- based GeoEye’s closing price of $15.17 on July 20.
Adding GeoEye’s operations will reduce DigitalGlobe’s reliance on the U.S. government, its largest customer. Revenue from the U.S. government will represent about half of the combined company’s estimated 2012 sales of $600 million, compared with 63 percent of DigitalGlobe’s sales, according to a slide presentation on the company’s website.
“The combined business will be more diversified than either company is today,” DigitalGlobe Chief Executive Officer Jeff Tarr said on a conference call.
GeoEye rose 35 percent to $20.43 at the close in New York, its biggest daily increase since September 2004. DigitalGlobe, based in Longmont, Colorado, gained 5.8 percent to $15.04, the most since May 25.
The transaction will probably close late in the fourth quarter or early in 2013’s first quarter, Tarr said. He will lead the combined company, which will be based in Longmont and keep the DigitalGlobe name.
DigitalGlobe and GeoEye provide satellite images to customers such as Google Inc. and the U.S. Defense Department. In May, DigitalGlobe rejected a takeover offer from GeoEye for about $792 million, saying the bid undervalued its business.
Capital and expense savings from the combination will exceed $1.5 billion and be realized over two years, DigitalGlobe Chief Financial Officer Yancey Spruill said on the call.
DigitalGlobe plans to complete the two satellites now under construction, GeoEye2 and WorldView-3, Tarr said. The company will launch the first satellite in 2013 or 2014, and delay the launch of the other until later in the decade, preserving it as a “ground spare,” Spruill said.
Capital spending at the combined company will probably average $200 million annually in the “long term,” compared with $400 million to $500 million now, Spruill said.
The company will have a backlog of future work of more than $3 billion, according to the slide presentation.
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