Telesat Sellers Said Trying to Span Value Gap on Deal

Telesat Holdings Inc. owners Loral Space & Communications Inc. and Canada’s Public Sector Pension Investment Board are at odds over how to value the unit’s sale, attempting to bridge a $100 million value gap to complete a $7 billion deal, people with knowledge of the matter said.

Loral, a shell company that derives almost all of its value from a 63 percent stake in Telesat, and Canada’s PSP, which owns the rest of the satellite company, have been negotiating with Ontario Teachers’ Pension Plan to sell the company for months. Loral, based in New York, is willing to sell itself for about $85 a share, a price Ontario Teachers’ is willing to pay, according to the people, who asked not to be named because the talks are private.

Canada’s PSP, which controls about 67 percent of voting rights, wants a lower price because it will maintain its 37 percent stake, and therefore is effectively a buyer, the people said. The deal has been further complicated because of an appeal of a patent infringement suit ViaSat Inc. brought against Loral’s former subsidiary, which affects Telesat’s value, one of the people said.

The difference in perceived value amounts to slightly more than $100 million, the people said. The total enterprise value of Telesat including debt, if a deal is completed between $80 and $85 a share, would be about $7 billion. Loral and Canada’s PSP are actively working to come to an agreement and a deal could still be announced as soon as July, the people said.

Loral’s shares rose 1.8 percent to $73.21 at 10:13 a.m. in New York, giving it a market value of about $2.3 billion. The shares had fallen 11 percent this year through yesterday.

First Attempt

Loral and Canada’s PSP attempted to sell Telesat about three years ago and failed because they couldn’t agree on a price. The process soured a relationship between Loral’s largest shareholder, Mark Rachesky, Carl Icahn’s former chief investment officer, and Canada’s PSP. The gap then was also about $100 million of equity value, the people said.

The two Telesat co-owners stopped speaking to each other after they couldn’t agree on a transaction. The sides came back together earlier this year and received offers from private-equity firms and Canadian pension plans, including Ontario Teachers’ and Canada Pension Plan Investment Board, the country’s biggest pension fund manager.

Ontario Teachers’ remains the front-runner to acquire Telesat if Canada’s PSP and Loral can agree on a price, the people said.

A transaction would involve recapitalizing the company, allowing Canada’s PSP to maintain its 37 percent ownership while also selling some of its stake, the people said.

A jury found in April that Loral’s former subsidiary Space Systems/Loral LLC must pay ViaSat $283 million in damages for patent infringement. Loral and SSL are appealing the verdict.

Michael Bolitho, a Telesat spokesman, declined to comment, as did Joele Frank, a spokeswoman for Rachesky, and Deborah Allan, a spokeswoman for Ontario Teachers’, based in Toronto. Mark Boutet, a spokesman for Montreal-based Public Sector Pension Investment, didn’t respond to a request for comment.

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