The expected merger between commercial satellite imagers DigitalGlobe [DGI] and GeoEye (GEOY) finalized yesterday.
The combined company, to be known as DigitalGlobe, has a market capitalization of $2.1 billion, based on DigitalGlobe’s closing stock price, according to a company statement. Shares of DigitalGlobe were $27.98, down $0.32 (1.13 percent), at the close of trading yesterday.
“With a stronger financial profile, more robust suite of services and among the world’s most advanced geospatial production and analysis capabilities, we will be even better positioned to meet customers’ needs and create value for shareowners,” DigitalGlobe CEO and President Jeffrey Tarr said yesterday in a statement.
In connection with the combination with GeoEye, DigitalGlobe said it entered into new senior secured credit facilities in the aggregate amount of $700 million. The facilities consist of a term loan facility of $550 million and a revolving credit facility of $150 million. DigitalGlobe has borrowed the full amount of the term loan facility to fund the combination with GeoEye and to refinance certain existing indebtedness of GeoEye and DigitalGlobe.
Borrowings under the term loan facility will bear interest at an amount equal to the adjusted London Interbank Offered Rate (LIBOR) plus 2.75%, with a step-down to the adjusted LIBOR rate plus 2.50% if DigitalGlobe’s leverage ratio is equal to or less than 2.50:1.00. The credit agreement contains affirmative and negative covenants that DigitalGlobe believes are usual and customary for a senior secured credit agreement. The credit agreement also requires DigitalGlobe to maintain a maximum leverage ratio and a minimum interest coverage ratio.
Also in connection with the combination, GeoEye, discharged and called for redemption all of GeoEye’s 75 outstanding 9.625% senior secured notes due 2015 and 8.625% senior secured notes due 2016.
DigitalGlobe expects to announce fourth quarter 2012 and full year 2012 earnings on Feb. 26, and intends to provide full-year 2013 financial guidance at that time.
Finalizing the deal ends a long-running saga that began when the National Geospatial-Intelligence Agency (NGA) informed GeoEye in June it would not exercise the full year EnhancedView Service Level Agreement option for this contract year. EnhancedView is a program to provide NGA with satellite imagery (Defense Daily, June 26).
DigitalGlobe in July agreed to acquire GeoEye, its primary United States-based competitor in the satellite earth imagery and geospatial analysis market, in a stock and cash deal valued at $900 million (Defense Daily, July 24).
The merger agreement followed several months of bids and counter-bids by both companies to acquire the other, beginning with an undisclosed offer by GeoEye in February. The merger offers became public in May when GeoEye made another unsolicited, andultimately unsuccessful, offer for DigitalGlobe valued at $792 million.
The deal essentially leaves one main United States-based company in the commercial satellite imagery space that uses its own satellites to provide services to the U.S. government, in particular the Defense Department. International competitors include the Astrium unit of the European Aeronautic Defence and Space Company (Defense Daily, May 7 and May 8).
DigitalGlobe provides earth imagery and geospatial analysis.