* Cash-and-stock deal offers 34 pct premium at $20.27/shr
* DigitalGlobe CEO Jeffrey Tarr to head combined company
* Deal expected to close Q4 2012 or Q1 2013
* Shares of GeoEye and DigitalGlobe rise
By Bijoy Anandoth Koyitty and A. Ananthalakshmi
July 23 DigitalGlobe Inc, which rejected
the advances of GeoEye Inc earlier this year, has
struck a deal to buy its former suitor for $453 million,
creating the world's largest provider of commercial satellite
The companies, the only suppliers of commercial satellite
imagery to U.S. spy and military agencies, are joining forces
ahead of drastic cuts expected in the U.S. defense budget.
The combined company aims to derive about half of its
revenue from commercial and international customers in a bid to
reduce dependence on the U.S. government.
In the commercial sector, DigitalGlobe and GeoEye supply
imagery to location-based technologies like Google Maps
, and navigation device application makers such as
Garmin Ltd and Nokia Oyj.
"By bringing together our two companies, we expect to
immediately gain substantial scale, diversify our revenue,
generate more than $1.5 billion in synergy," DigitalGlobe CEO
Jeff Tarr, who will head the company, said on a conference call
DigitalGlobe said the combined company expects pro forma
revenue base of more than $600 million for 2012, after adjusting
for proposed cuts in government funding.
Analysts on average expect DigitalGlobe to report revenue of
$386.7 million for 2012, according to Thomson Reuters I/B/E/S.
Analysts expect GeoEye to report revenue of $366.6 million for
Tarr, responding to a question on potential antitrust
issues, said the companies have begun talks with key customer,
the U.S. National Geospatial Intelligence Agency (NGA), on the
"We believe there are no regulatory hurdles we can't
overcome ... We have seen no red flags. We are well advised and
look forward to closing in a timely manner," Tarr said on the
The cash-and-stock offer values each GeoEye share at $20.27
on the basis of the stock's Friday closing price of $15.17,
representing represents a 34 percent premium.
DigitalGlobe said it secured a $1.2 billion fully committed
financing from Morgan Stanley Senior Funding Inc and The Bank of
Tokyo-Mitsubishi UFJ Ltd to refinance the combined company's
outstanding debt, which is just under $1.1 billion.
The deal is expected to close in the fourth quarter of 2012
or the first quarter of 2013.
TABLES TURN ON GEOEYE
DigitalGlobe rejected a $792 million cash-and-stock offer
from GeoEye in May, saying it would fare better than its rival
in the expected round of budget cuts.
GeoEye suffered a setback in June when a U.S. government
agency warned that it may cut funding to GeoEye, sending its
shares down sharply and making it vulnerable to a
DigitalGlobe in contrast said the government agency plans to
renew its contract for the third full year, without any cuts.
GeoEye's largest shareowner Cerberus Capital Management and
its chairman and CEO have agreed to vote in favor of the merger,
the companies said.
Cerberus agreed that its ownership in the combined company
will not exceed 19.9 percent. It will nominate one of GeoEye's
The new board will have 10 members, initially comprising of
six members from the current DigitalGlobe board and four from
Under the terms of the deal, GeoEye stockholders can opt for
1.137 shares of DigitalGlobe stock and $4.10 per share in cash
or 100 percent of the consideration in cash at $20.27 per share.
They can also choose 100 percent of the consideration in stock
at 1.425 shares of DigitalGlobe stock.
GeoEye shareholders are expected to own 36 percent of the
new company under the deal, which caps the cash portion of the
DigitalGlobe shares were up 8 percent at $15.38 in morning
trade on the New York Stock Exchange, while those of GeoEye were
up 29 percent at $19.55 on the Nasdaq.