Satellite communications service provider Inmarsat has rejected a preliminary takeover offer by Charlie Ergen's EchoStar, the company announced late Friday.
The news followed market speculation that fuelled a double-digit hike in the satellite firm's share price. Inmarsat's stock gained 13.5% on the London Stock Exchange Friday to end the day at 474 pence, after which the company confirmed that it had "received a highly preliminary and indicative non-binding proposal from EchoStar."
It rejected the offer, the value of which has not been revealed, "on the basis that it very significantly undervalued Inmarsat and its standalone prospects. The Board remains highly confident in the independent strategy and prospects of Inmarsat."
Now, to meet the stock exchange's rules, EchoStar Corp. LLC (Nasdaq: SATS) has until July 6 to make a firm and detailed takeover offer, or announce that it is no longer interested.
Inmarsat plc (London: ISAT), which provides communications services to the maritime, aviation, military and government sectors, reported first-quarter revenues of US$345.4 million and profit after tax of $53.6 million. It is guiding for steady growth in revenues, earnings and cashflow in the next five years, driven in part by its efforts to enable in-flight WiFi connectivity to airlines. (See Eurobites: Airline WiFi Scheme Set for Take-Off and Inmarsat, DT Launch WiFi-in-the-Sky Service.)
Inmarsat is regarded as ripe for acquisition as its share price has slumped during the past few years: Before Friday's hike, it had lost more than half of its value during the past 12 months and currently commands a market value of £2.15 billion ($2.88 billion).
EchoStar, which provides satellite-based broadband services through its Hughes division, reported first-quarter revenues of almost $502 million and a net loss of $21.2 million. Its share price edged won slightly, by 0.9%, to $47.06, giving the company a market value of about $4.5 billion.
— Ray Le Maistre, Editor-in-Chief, Light Reading