Echostar studying financing for improved Inmarsat bid

Echostar is discussing financing options for an improved bid for UK rival Inmarsat.

According to Bloomberg, which cited people familiar with the matter, no final decision had yet been taken and the American outfit might yet step away.

As of 1856 BST, American Depositary Receipts of Inmarsat were trading 4.71% higher at $7.47, giving it a market capitalisation of roughly $3.23bn, having earlier hit an intra-session high of $7.80.

Echostar on the other hand sported a market value of close to $4.45bn, although its shares were changing hands at a multiple of approximately three times' sales, versus two times' sales over at Inmarsat.

In a research note sent on 12 June, Barclays argued that a tie-up between Echostar and Inmarsat offered scant room for cost synergies, although it would offer scale and diversification in an industry plagued by over-supply.

But the real wild card was the US spectrum on lease to Ligado, which the broker valued at 100p per share to Inmarsat, possibly rising to as much as roughly 340p, although there was low visibility on that.

SoftBank Group's OneWeb was among the other companies that had been mooted as potential suitors for Inmarsat in the past, although Barclays was skeptical about that.

"The press reported in 2017 that OneWeb had discussions with Inmarsat. We do not see a clear rationale for other satellite operators to consider ISAT," Barclays said.

Barclays's standalone valuation for Inmarsat was 420p.

Nonetheless, at least as recently as 11 June, RBC was rather more upbeat, having lifted its target price for Inmarsat from 725p to 850p on that occasion.

The Canadian broker said the field of potential counter-bidders included: ViaSat, SES, Eutelsat, mobile operators more generally who might be interested in Inmarsat's worldwide L-band (IoT) and S-band in Europe.

Private equity outfits were also potential suitors, RBC said.

Under UK Takeover Panel rules, Echostar had untl 6 July to table an offer.

London-listed shares of Inmarsat ended the Monday session 0.46% lower to 524.20p.