Eutelsat Communications SA agreed to acquire Satelites Mexicanos SA for $831 million to expand in the faster-growing Latin American satellite market.
Eutelsat plans to finance the takeover using a bridge loan, and assume net debt of $311 million, Paris-based Eutelsat said today. It expects privately held Satmex, as the Mexico City-based satellite company is known, will add to per-share earnings starting in the 12 months ending June 30, 2015.
Demand for satellite services in Latin America is growing at an annual rate of more than 7 percent between 2011 and 2016, Eutelsat said, citing statistics from Euroconsult. Satmex, the operator of three satellites that cover 90 percent of the population of the Americas, in 2011 emerged from bankruptcy protection for the second time in five years.
“Six years ago, Satmex was a very different company and in a very difficult situation. It was in disarray,” Eutelsat Chief Executive Officer Michel de Rosen told analysts on a conference call. “It has now become a vibrant company, growing fast and with even more growth ahead of itself.”
Eutelsat was attracted in part by a Mexican law passed this year to open up the pay-television market to more competition, benefiting satellite operators, said a person familiar with the situation who asked not to be named because the details are private. Grupo Televisa SAB, the nation’s biggest pay-TV company, is already a Satmex customer, as is billionaire Carlos Slim’s America Movil SAB, which is seeking to enter the pay-TV market in Mexico.
Eutelsat shares fell 6.2 percent to close at 21.02 euros in Paris. The company yesterday forecast sales growth or more than 2.5 percent for 2013 to 2014 and an average growth rate of more than 5 percent for the following two years through June 30, 2016.
Carl Murdock-Smith, a London-based analyst at JPMorgan Chase & Co., said the guidance “disappoints,” adding analysts’ estimates will probably be cut.
Revenue rose 5.1 percent to 1.28 billion euros ($1.7 billion) in the 12 months through June, while earnings before interest, taxes, depreciation and amortization increased 4 percent to 995 million euros, Eutelsat said.
“There is a slowdown in the trend of demand,” de Rosen said. “We believe that some regions, some applications are more promising, more dynamic, more vibrant than others, which is why we want to be where there is maximum growth and potential profitability.”
Last year, Satmex’s FSS business had adjusted earnings before interest, taxes, depreciation and amortization of $89.1 million on revenue of $111.8 million.
The transaction, subject to government and regulatory approvals, will probably be completed by the end of this year, the companies said.
Perella Weinberg Partners LP is advising Eutelsat, while Goldman Sachs Group Inc. and Credit Suisse Group AG are Satmex’s advisers.