Shares in Inmarsat Plc jumped 17 percent on Wednesday after the British satellite operator said it was in talks about a $3.3 billion cash offer from a private equity-led consortium, opening up the possibility of a bidding war.
The consortium, which initially included UK-based Apax Partners, U.S.-based Warburg Pincus and Canada Pension Plan Investment Board (CPPIB), was later also joined by Ontario Teachers’ Pension Plan Board, Inmarsat said.
“The proposal remains under discussion”, Inmarsat said late on Tuesday.
The January 31 approach came six months after Inmarsat rebuffed a $3.25 billion cash and shares bid from U.S. satellite group EchoStar.
Analysts at Jefferies said that Inmarsat’s valuation meant it was no surprise to see renewed takeover interest.
“The decision to unilaterally disclose the consortium’s six-week-old non-binding cash bid, almost identical in value to the rejected EchoStar bid, feels like a well-advised ‘stalking horse’ that could well now result in a revised bid (from either suitor),” Jefferies said.
Inmarsat, a long established provider of communication services to shipping, sees a growing opportunity to supply in-flight broadband services to commercial aircraft.
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.
Inmarsat has also been investing heavily in its networks, particularly the opportunity to provide in-flight connectivity and as a result cut its dividend last year.
It was trading more than 60 percent off its end-2015 high before it announced the approach late on Tuesday.
The shares rose 17 percent to a five-month high on Wednesday in the company’s best trading session since June 2005.
The consortium proposed a cash offer of $7.21, or 544 pence, for every Inmarsat share, a premium of 24 percent to Inmarsat’s Tuesday close of 437.8 pence and a 47 percent premium to the price on Jan. 31.
Inmarsat sees capital expenditure moderating after 2020, which it hopes will boost cashflow. It also expects significant growth in markets including aviation and providing communications to government.
The company was the first international satellite operator to be privatised, and Apax was part of the group that invested in 2003, before taking it public two years later.
According to UK takeover rules the consortium has until April 16 to make a firm buyout offer or walk away.