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Confusion at Eutelsat vs Abertis and Hispasat

July 29th saw Eutelsat unveil its end-of-year results. It also gave market analysts a chance to question the CEO Rodolphe Belmer on the satellite operator’s strategy.

Analysts eagerly wanted to know what the latest news was on Eutelsat’s move to sell its 33.69 per cent stake in Madrid-based operator Hispasat. Somewhat focusing the equity analysts’ minds were comments made by the other major stake-holder in Hispasat, Spanish infrastructure company Abertis.

Abertis is firmly maintaining that Eutelsat’s attempt to enforce a “PUT” option it has in place with Abertis “is not valid” and not recognised by shareholders in Hispasat.  Abertis own 57 per cent of Hispasat.

One analyst (from investment bankers Macquarie) asked when Eutelsat might expect to receive the valuable proceeds from the Hispasat sale. Belmer said: “On Hispasat, we don’t have a clear view on the calendar, even though it’s very clear in the shareholder agreement we have with our partners in Hispasat. But for the moment, we cannot comment on specific dates when we receive the payments from Abertis. We have initiated, as to the PUT process and together with the PUT process comes a process of valuation of the company, which takes some time. The duration of the process as described and signed in the shareholder agreements lasts around three months.”

The next analyst (from Kepler) had another go at much the same question, and specifically the date that the PUT could be exercised. Belmer said: “On Hispasat, the situation is very clear. We have a shareholder agreement with our partner that is in Hispasat with, as you mentioned very well, a lockup period until July 2017. But we have the right to exercise the put every year as of July 2016, it’s very explicit in our agreement and this is a very clearly an explicit exception to the lockup period, meaning that we are completely entitled to exercise our put as of this July, as we did and that we communicated to you.”

Another analyst (Deutsche Bank) then had a go, asking whether Eutelsat’s dividend was dependent on the Hispasat cash. But Belmer’s response had softened: “We are pretty convinced we’ll be able to dispose of our stake in Hispasat. It’s true that it’s dependent on the reaction of Abertis and their compliance with our shareholder agreement, it’s true. But even though it takes time, it will not prevent us at all from delivering on our dividend policy and I want to be very clear on that.”

Indeed, Deutsche Bank’s Laurie Davison later in the day put out a report to investors, saying: “We see major risks of a dividend cut next year, especially after what Abertis stated at their results today their legal advice that they do not need to buy ETL’s Hispasat for another 12 months and still requires Spanish

gov’t approval when the political situation is in flux.”

At the end of the day – and presuming the lawyers can sort out whether the PUT is valid – Eutelsat should receive around €400 million for its Hispasat stake. But it may be well beyond 12 months from now.

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