Exclusive: Telesat owner Loral shortlists Apax, pension funds for sale - sources

Wed Mar 19, 2014 4:36pm EDT
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By Soyoung Kim and Greg Roumeliotis

NEW YORK (Reuters) - Loral Space & Communications Inc (LORL.O: Quote), which holds a majority stake in Canadian satellite communications company Telesat Holdings Inc, has selected private equity firm Apax Partners LLP and two Canadian pension funds to negotiate a sale of Telesat, people familiar with the matter said.

The move marks a key step in a complex auction process for Loral, in which financial investors who covet control of Telesat need to bring another Telesat shareholder, Canada's Public Sector Pension Investment Board (PSP), onboard.

Loral, which derives almost all of its value from Telesat, holds a 62.8 percent economic interest in Telesat but only 33.3 percent of its voting stock. PSP has a 35.3 percent economic interest and 66.7 percent of the voting power, according to regulatory filings.

Therefore, any buyer seeking control of Telesat would also need PSP's agreement.

The three parties chosen by Loral - Apax, the Canada Pension Plan Investment Board (CPPIB) and the Ontario Teachers Pension Plan - are now expected to negotiate with PSP about a deal, although the exact next steps are not yet clear.

At stake is a leveraged buyout that could reach $6 billion to $7 billion, making it the second largest so far this year following Cerberus Capital Management LP's $9.4 billion merger of its Albertsons supermarket chain with Safeway Inc SWY.N, which was announced earlier this month.

The people asked not to be identified because the talks are private. Loral, Apax and CPPIB declined to comment, while representatives of Telesat, PSP and Ontario Teachers did not respond to requests for comment.

Loral and PSP jointly explored the sale of Telesat to other companies in the sector and private equity firms three years ago, seeking as much $7 billion, but could not agree on a price. The experience soured the relationship between Loral and PSP, whose co-ordination would be needed for a joint sale of Telesat.   Continued...

A woman enters the offices of private equity firm APAX in London May 18, 2012. REUTERS/Chris Helgren