Inmarsat takeover clears final hurdle after hedge funds drop challenge

A private equity consortium’s USD 3.4 billion takeover of Inmarsat has been recently approved at a court hearing after hedge fund investors dropped a plan to challenge the value of the deal. Activists Oaktree, Kite Lake and Rubric Capital wanted the court to block the deal’s scheme of arrangement because they said the price did not reflect the value of Inmarsat’s longstanding agreement with US broadband company Ligado. Victory for the hedge funds would have sent shockwaves through the M&A sector because scheme of arrangements are usually rubber stamped by courts following shareholder approval.

Inmarsat’s buyer – a consortium of UK-based Apax Partners, US-based Warburg Pincus, and the Canada Pension Plan Investment Board (CPPIB) – squared up to the hedge funds when it made its offer final and said it would not extend the December 10, 2019 expiration date, in effect closing the window for the challengers to win any concessions.

The hedge funds wanted the judge to block the takeover because they said the price did not reflect the future value of Inmarsat’s contract with Ligado, which licenses some of the satellite group’s airwaves but has struggled to create a viable network.

Inmarsat’s shareholders decisively backed the takeover in May 2019, with nearly 79 percent of shares voted in favor. The hedge funds, led by Oaktree with a 2.85 percent stake, argued that Ligado could be on the cusp of modifying its license from US regulators, which could potentially trigger payments to Inmarsat. But according to the satellite company, the prospect and timing of any revenue or other value from its Ligado contract remained uncertain. Its lawyer Michael Todd stated Inmarsat had clearly communicated to shareholders the board’s uncertainty about revenue from Ligado and about the prospect of the operator modifying its license in the face of opposition.