Ontario Teachers' Pension Plan and Public Sector Pension Investment Board are nearing a $7-billion (U.S.) deal for Canadian satellite company Telesat Holdings Inc. after months of delays and discussion breakdowns, said people with knowledge of the matter.
Under the terms being discussed, the funds will acquire Loral Space & Communications Inc., a publicly traded shell company that owns 63 per cent of Telesat, for about $85 a share, or $2.6-billion, said the people, who asked not to be named discussing private information. While a deal could be announced next month, talks may fall apart again given the parties' inability to reach an agreement in the past, the people said.
Telesat has been on and off the block for years. Loral and PSP, which already owns 37 per cent of Telesat, called off a sale effort in 2011, after offers from bidders including EchoStar Corp. and Carlyle Group LP fell short of expectations. Talks started again this year before stalling in June because Mark Rachesky, Loral's largest shareholder, couldn't agree with PSP on a price to sell the company, failing to bridge an equity gap of about $100-million, people said then.
Three-way talks between Loral, PSP and Ontario Teachers' restarted last month after Ontario Teachers' and PSP raised their offer, the people said, leading to renewed negotiations.
Representatives for Loral, Ontario Teachers' and PSP declined to comment.
Unit Settlement Loral climbed 7.2 per cent to $78.50 at the close in New York, giving it a market value of about $2.4-billion. Telesat had $3.1-billion of long-term debt as of Sept. 30, 2014, according to a company filing.
The exact price will depend on how a September ViaSat Inc. lawsuit settlement is divided between the New York-based company and its former subsidiary, Space Systems/Loral LLC. That unit was sold to MacDonald, Dettwiler and Associates Ltd. in 2012 for about $1-billion.
The division of the settlement, the final hurdle to a sale, may be determined in the coming weeks, the people said.
Loral and PSP acquired Telesat from Canadian telecommunications company BCE Inc., a deal announced in December 2006 valued at about $3-billion including debt.
A sale now would provide Loral with two long-term owners while allowing Loral's shareholders, including Rachesky's MHR Fund Management, which owns 38 per cent of the company, an attractive premium to their investment. Selling Loral as a whole, rather than the Telesat assets alone, which was previously floated, would save both the company and its shareholders a larger tax bill on the sale.
Telesat owns 14 satellites and manages the operations of satellites for third parties, according to its website. The company was founded in 1969 and launched the world's first commercial, domestic communications satellite in geostationary orbit in 1972.