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Reuters: Loral hires bank to advise on sale

  • Reuters reports Loral (LORL +0.7%) has hired i-bank Perella Weinberg to advise its board on a potential sale.
  • The news service reported in January Loral, which owns a majority stake in Canadian satellite network owner Telesat (but a minority voting stake), was working with Credit Suisse regarding a sale, and that it was talking with Canada's public sector pension investment board (another Telesat shareholder) about a joint Telesat sale.
  • Any bid for Loral would depend on the support of 38% shareholder MHR Fund Management.
Comments (2)
  • Chris DeMuth Jr.
    , contributor
    Comments (5396) | Send Message
     
    Loral Liquidation Opportunity Worth Almost $100

     

    Mark Rachesky is Carl Icahn protégé and chairman of Loral Space & Communications (LORL). He helped revive the company after bankruptcy, return a massive amount of capital to his fellow shareholders, and prepare it for sale. Here are the total returns over the past five years:

     

    This has been a favorite investment idea of mine at numerous times over these past five years. It was one of my top two favorite investments that I wrote about in 2009 for the following year. From 2009 through the present, the market never really caught up with LORL’s value because Telesat was not consolidated in LORL’s financial reporting. While the market failed to fully value LORL, the board and management were constantly taking the steps necessary to maximize shareholder value – they issued a $13.60 special dividend, they sold their SS/L subsidiary for a high price, and they were able to distribute another $29 per share as a result. Net of the returned capital, the cost of the shares from the original investment idea is now a substantially negative number. But, the important question is this:

     

    What’s Left?

     

    There are currently five private equity firms considering bids for Telesat, LORL’s last remaining important asset. Next month, the sellers could enter exclusive talks with the highest bidder. The hope and expectation is to get a price that would net LORL holders over $90 per share. If such a deal could be negotiated, it could be finalized and announced in April and closed in the latter half of 2014. The bid-ask spread is likely to be relatively easy to bridge as these assets are not hard to value and at least two of the PE firms appear to be eager to own them. Alternatively, strategic bidders could include DISH Network (DISH), EchoStar (SATS), Intelsat (I), and SES (SESG).

     

    What’s the Catch?

     

    The major remaining hurdle is outstanding patent litigation with ViaSat (VSAT) which buyers would prefer to no inherit. The suit is currently scheduled to go to trial in late March 2014. It is reasonable to expect efforts to settle the case between now and then.
    3 Mar 2014, 04:49 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (5396) | Send Message
     
    New Disclosure:

     

    Since the Sale, Loral’s principal asset continues to be its majority ownership interest in Telesat.

     

    With the goal of maximizing shareholder value, we have, with the agreement of our Canadian co-owner, Public Sector Pension Investment Board (“PSP”), commenced a process to explore potential strategic transactions involving the possible monetization of Loral’s interest in Telesat.

     

    The exact structure of any such transaction has not yet been determined. As currently contemplated, such a transaction would be accomplished through a disposition of Loral itself and would likely require the negotiation of a new shareholders agreement between the potential acquiror of Loral and PSP.

     

    There can be no assurance as to whether, when or on what terms a strategic transaction involving Telesat or Loral may occur, or that any particular economic, tax, structural or other objectives or benefits with respect to any transaction involving Telesat or Loral’s interest therein will be achieved.
    4 Mar 2014, 08:07 AM Reply Like
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