[SatNews] DigitalGlobe, Inc. (NYSE: DGI) and GeoEye, Inc. (NASDAQ: GEOY), have announced that the boards of directors of both companies have unanimously approved…
…a definitive merger agreement under which the companies will combine in a stock and cash transaction valued at approximately $900 million. The combination of DigitalGlobe and GeoEye will create a global leader in Earth imagery and geospatial analysis with a more diversified revenue base, a superior financial foundation and significant growth potential.
Under the terms of the agreement, GeoEye shareowners will have the right to select either 1.137 shares of DigitalGlobe common stock and $4.10 per share in cash, 100 percent of the consideration in cash ($20.27) or 100 percent of the consideration in stock (1.425 shares of DigitalGlobe common stock), for each share of GeoEye stock they own. The amount of cash and stock subject to proration depends upon the elections of GeoEye shareholders, such that aggregate consideration mix reflects the ratio of 1.137 shares of DigitalGlobe common stock and $4.10 per share in cash. Based upon the closing prices of DigitalGlobe and GeoEye as of July 20, 2012, the transaction delivers a premium of 34 percent to GeoEye’s July 20, 2012, closing price of $15.17 per share. Upon completion of the transaction, DigitalGlobe shareowners are expected to own approximately 64 percent and GeoEye shareowners are expected to own approximately 36 percent of the combined company. The transaction structure will allow both DigitalGlobe and GeoEye shareowners to participate in the substantial value creation opportunity resulting from this combination.
The combined company will be named DigitalGlobe and continue to trade on the NYSE under the symbol DGI. It will have a 10-member board of directors, with six initial members from the current DigitalGlobe board and four initial members from the board of GeoEye. Jeffrey R. Tarr, President and Chief Executive Officer of DigitalGlobe, will serve as President and Chief Executive Officer of the combined company, and General Howell M. Estes III, Chairman of the Board of DigitalGlobe, will serve as Chairman. It is anticipated that, after close, Matt O’Connell, Chief Executive Officer and President of GeoEye, will assist the management of the combined company in an advisory capacity. The company will be headquartered in Colorado, have a large and important presence in Missouri and Virginia, and maintain offices in other locations around the globe.
The combined company will conservatively have a pro forma 2012 revenue base of more than $600 million, after adjusting for the currently proposed lower U.S. government fiscal year 2013 EnhancedView funding plan. As a result, the combined company would therefore have better revenue certainty, lower dependence on the U.S. government as a source of revenue, a higher percentage of commercial and international revenue, and be well positioned for future growth.
At close, the combined company is expected to have a constellation of five earth observation satellites and a broad suite of high-value geospatial production and analytic services. The combined company will also have two state-of-the-art satellites under construction, WorldView-3 and GeoEye-2. Over time, the combined company plans to maintain an optimized three-satellite constellation that will meet the needs of the U.S. government, international governments and commercial customers, while delivering better returns to shareowners. Taken together with other operating efficiencies, the net present value of future savings is estimated to be more than $1.5 billion.
By bringing the two companies together, this combination will enable the U.S. government to meet the requirements of the EnhancedView program at substantial savings to the U.S. taxpayer. In addition to the compelling savings, the U.S. government and other customers will benefit from an optimized constellation and better integrated imagery collection, processing and analytics. In return, shareowners should reasonably expect a more stable and predictable funding environment. The combination will deliver extraordinary value to customers around the globe. By bringing together the imagery collection, processing and analytic capabilities of both companies, it will be better able to serve a wide range of customer needs and compete in a high-growth and dynamic global market.
DigitalGlobe has secured a $1.2 billion fully committed financing from Morgan Stanley Senior Funding, Inc. and The Bank of Tokyo-Mitsubishi UFJ, Ltd. to refinance the combined company’s outstanding debt. The transaction, which is expected to be completed in the fourth quarter of 2012 or the first quarter of 2013, is subject to the satisfaction of customary closing conditions, including the receipt of requisite regulatory approvals and approval from GeoEye shareowners with respect to the merger and from DigitalGlobe shareowners with respect to the issuance of DigitalGlobe common stock in the merger. GeoEye’s largest shareowner, Cerberus Capital Management, L.P. (“Cerberus”), and its Chairman and CEO each have agreed to vote in favor of the merger, and DigitalGlobe’s largest shareowner, Morgan Stanley Principal Investments, Inc., and its Chairman and CEO each have agreed to vote in favor of the issuance of DigitalGlobe common stock in the merger. Cerberus intends to continue its investment in the combined company, and may purchase shares of DigitalGlobe in advance of the closing of the transaction. Cerberus has agreed to vote those shares with the board of directors and has entered into a standstill agreement with DigitalGlobe in which their ownership in the combined company will be capped at 19.9 percent. One of GeoEye’s board designees will be put forth by Cerberus.
