A note to clients from investment bank Exane/BNPP says that, in the bank’s view, “Echostar is likely to make a formal bid for Inmarsat.”
The Exane note examines the rationale behind EchoStar’s move and how EchoStar’s co-founder and chairman, Charlie Ergen, might value the target business.
The bank states: “The key question in our view is how much strategic value does Charlie Ergen see in Inmarsat’s spectrum rights. We have argued that Echostar could value Inmarsat’s operating assets at 500-600p [per share] using acceptable multiples and debt structure and pricing in $40 million of cost synergies.”
It adds: “We believe that range could be revised upward if Ergen were to take an aggressive view on the strategic value of controlling Inmarsat spectrum rights. Assuming $0.10 to $0.15 per MHz POP suggests Inmarsat 40 MHz L-band spectrum rights (currently contracted to Ligado) could be worth an additional c£ 200-300pence/share. Conversely, if Inmarsat’s management were to hold out for more and have Echostar walk away, Inmarsat share price would probably fall back towards 400p as we doubt counter bidders are likely to emerge.”
As to the Eutelsat interest, the news sent Inmarsat’s shares up almost 3 per cent, and drove Eutelsat’s DOWN 7.5 per cent) in trading yesterday.