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Report on Business CPPIB, Ontario Teachers part of Triton consortium to own 53 per cent of satellite operator Inmarsat

Two of Canada’s largest pension funds have committed more than half of the US$3.08-billion that the Triton consortium has agreed to pay for Inmarsat PLC, a U.K.-based provider of satellite services for data and voice communications.

Canada Pension Plan Investment Board said Monday its financial commitment will be approximately US$900-million, or about 29.27 per cent of the total amount, assuming the deal receives all approvals.

Ontario Teachers’ Pension Plan didn’t announce the value of its commitment but pointed to regulatory documents that say it has agreed to provide 24.39 per cent of the consortium’s investment, which would be about US$750-million.

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Funds managed by Apax Partners and Warburg Pincus will have 24.39-per-cent and 21.95-per-cent stakes, respectively.

The Toronto-based pension managers – two of Canada’s biggest institutional investors – said they believe the satellite sector has attractive investment potential, given the long lead times and technical expertise required.

They said Triton Bidco believes that integrated satellite operators with scale such as Inmarsat are well positioned as network provision becomes more complex.

Documents filed with British regulators on Friday valued the offer at US$7.21 per Inmarsat share, including US$7.09 to purchase each share and 12 US cents per share from a previously announced dividend to shareholders.

Inmarsat is a long-established provider of communication services to shipping and sees a growing opportunity to supply in-flight broadband services to commercial aircraft.

A takeover of the company could be closely scrutinized by British authorities because of Inmarsat’s position as a strategic asset.

The company was the first international satellite operator to be privatized, and Apax was part of the group that invested in 2003, before taking it public two years later.

The consortium’s approach, which was made on Jan. 31 but disclosed only last week, comes after Inmarsat rebuffed a US$3.25-billion cash and stock bid from EchoStar last summer.

Colorado-based EchoStar had proposed a cash and stock offer of 265 pence in cash and 0.0777 EchoStar shares for every Inmarsat share held, which valued Inmarsat at about 532 pence a share at the time.

Inmarsat had argued it “very significantly undervalued” the company and its standalone prospects and EchoStar dropped the bid last July.

Inmarsat said its directors consider the terms of the latest deal to be “fair and reasonable” and intends to unanimously recommend that shareholders vote in favour of the deal.

Inmarsat has been investing heavily in its networks, particularly focusing on in-flight connectivity, and as a result cut its dividend last year.

The stock has struggled in recent years as revenue in its maritime business - which is responsible for 41 percent of its total - has been eroded by competitors.

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Inmarsat sees capital expenses moderating after 2020, which it hopes will boost cash flow. It also expects significant growth in markets including aviation and providing communications to the government.

Inmarsat was advised by JPMorgan Cazenove, PJT Partners and Credit Suisse on the financial terms.

With files from Reuters

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