Telesat Canada being sold to crown corporation and international satellite firm

Thirteen remote First Nations across northern Ontario rely on satellite services from Telesat Canada for their communication services. This past year Telesat Canada was the winning bid to provide 2 additional transponders for the Northern Indigenous Community Satellite Network (NICSN) if and when funding is approved by Infrastructure Canada under the National Satellite Initiative.


BCE to sell Telesat in $3.42B deal
December 18, 2006 - CBC News

BCE Inc. said Monday it has launched a $3.42-billion deal to sell the Ottawa-based satellite operator Telesat Canada.

The buyers in the all-cash deal are the Public Sector Pension Investment Board, which is a Canadian Crown corporation, and Loral Space and Communications Inc., which is headquartered in New York City.

The new company will be known as Telesat and its headquarters will also be in Ottawa.

The pension plan will hold a 36 per cent economic stake in Telesat, but will hold voting control and a majority of seats on the company's board. Loral will hold a 64 per cent economic stake.

As part of the deal, Loral will contribute the fixed satellite services and network services assets of its Loral Skynet subsidiary, making Telesat the fourth-largest satellite operator in the world based on the number of satellites in orbit.

Dan Goldberg, the president and chief executive officer of Telesat, said the company will have 11 satellites in orbit, with four new ones slated for launch over the next three years.

The deal is expected to close in mid-2007.

Earlier in the year, BCE announced plans to sell a stake in Telesat. In September, the company filed papers for an initial public offering of Telesat shares.

But following BCE's decision not to proceed with an income trust conversion, CEO Michael Sabia said the company wasn't sure of its next step for the satellite subsidiary.

On Monday, Sabia said the sale of Telesat met his firm's ambitions.

"At the outset of this process, we set three goals," he said in a release.

"First, we were determined to surface the value of the asset. Second, we wanted to make certain any transaction fully protected the future of ExpressVu. And finally, we wanted to position Telesat as a truly global player in a rapidly consolidating industry.

He said the new company would be "global in scale, but Canadian-based and Canadian-controlled."

With about $30 billion in assets under management, PSP Investments is the pension fund manager for Canada's federal public service, the Canadian Forces and the Royal Canadian Mounted Police.

BCE has put in place a set of commercial arrangements between Telesat and Bell ExpressVu that guarantee ExpressVu access to current and expanded satellite capacity, including the launch of Nimiq 5 in 2009.

In the wake of the announcement, BCE shares gained 78 cents to close at $30.69 on the TSX.


To read the following CTV news story, click here

Telesat takeover part of industry makeover

The pending takeover of Telesat Canada will transform the dominant Canadian satellite operator into one of the world's biggest players, opening the door to new markets, chief executive officer Daniel Goldberg says.

“This transaction catapults Telesat into the league of global operators,” Mr. Goldberg said Monday in a telephone interview.

BCE Inc. said Monday it has agreed to sell Telesat for $3.25-billion to a joint venture formed by Canada's Public Sector Pension Investment Board ( PSP Investments) and Loral Space and Communications Inc., based in New York. The buyers will also assume $172-million of debt.

Telesat is one of a number of assets BCE has sold during the past year as it focuses on its main Bell Canada telephone business.

The takeover paves the way for immediate growth because Loral will transfer the assets of its Skynet unit, including four satellites, to the Telesat joint venture. Consolidation is a quicker path to expansion than the years-long process of setting up new satellites, said Mr. Goldberg, who will stay on as CEO of the new company.

The combination will turn Telesat into the world's fourth-biggest satellite operator. Telesat has seven satellites that cover the North American market.

Loral brings another four that serve faster-growing regions such as Latin America, Europe and Asia. Telesat's plan is to launch another four birds in the next three years.

The new company would have a combined revenue of $658-million as of the 12 months that ended Sept. 30, along with a backlog of orders worth $5.6-billion. It would have earnings before interest, tax, depreciation and amortization of $341-million for the period. PSP Investments and Loral will fund the purchase of Telesat through debt.

Telesat is the latest target in a wave of consolidation in the global satellite industry in which Mr. Goldberg, 41, has played a key role. New Skies Satellites NV, where he used to be CEO, was first snapped up by private equity firm Blackstone Group in November, 2004. A year later, Luxembourg-based satellite giant SES Global SA agreed to acquire New Skies.

Mr. Goldberg says there is still too much capacity in Latin America and parts of Asia.

But he added that demand is increasing over all because high-definition TV and two-way broadband services are becoming more popular.

“Demand is stronger and our customers are growing in a way they weren't when the telecom bubble burst in early 2000,” he said.

BCE, based in Montreal, lured Mr. Goldberg away from SES Global in September as it pursued a two-track divestment strategy. BCE had announced plans to sell a minority stake in Telesat in February, but also decided to try to sell the unit.

The appointment of the Harvard-trained lawyer, who has 15 years of experience in the satellite industry, proved instrumental in closing a deal, according to BCE chief executive officer Michael Sabia.

“Telesat was a great engineering company,” Mr. Sabia said Monday in a telephone interview. “With Dan's arrival, it got an astute leader, an operator with financial and marketing skills.”

This deal was a year in the making. One of PSP Investments' first private equity moves in 2005 was to invest in a fund run by MHR Fund Management LLC. One of the fund's biggest holdings is Loral, which emerged from creditor protection last year. When BCE put Telesat up for grabs, Loral and PSP Investment knew each other and moved quickly to make a joint bid.

Mr. Sabia indicated the price was higher than he expected. There were multiple rounds of bidding with some deep-pocketed suitors, said PSP Investments chief executive officer Gordon Fyfe.

BCE used the strong interest in Telesat to wring a “highly competitive” long-term contract for satellite signals for its ExpressVu television subsidiary from Loral and PSP Investments, Mr. Sabia said.

Loral ran into trouble in 2003 as demand for satellite capacity slowed and a debt-funded investment in a satellite phone company went sour. Mr. Goldberg doesn't believe Loral is placing too big a bet so soon after restructuring. He said Loral emerged from that process with an “extremely strong” balance sheet, and that Telesat is growing quickly and will pay down debt rapidly in coming years.

Loral and PSP Investments will own a 64-per-cent and 36-per-cent economic stake, respectively, in the new Telesat. However, to comply with foreign ownership restrictions, PSP Investments and other unnamed Canadian investors will control the company through a 66.7-per-cent voting stake. Loral will hold 33.3 per cent of the voting equity.

Rival bidders said PSP Investment and Loral may have overpaid for Telesat, as the company changed hands at a valuation well above that of industry rivals. Telesat fetched 13 times earnings before interest, taxes, depreciation and amortization (or EBITDA), while publicly traded satellite companies trade at nine times EBITDA.

PSP Investment's head of private equity, Derek Murphy, said that when Loral's contributions and new revenues from television company clients are factored in, the purchase price is 9.5 times EBITDA, close to industry norms.

“Telesat has a fantastic backlog of confirmed orders, a great engineering culture and best-of-class assets. It's a private equity dream,” Mr. Murphy said. He joined the fund last year after working on his own as a private equity investor, and as an investment banker with J.P. Morgan Chase and Gordon Capital.