Inmarsat slumps as Eutelsat walks away

Inmarsat crashed back down to earth with a bang on Tuesday as France’s Eutelsat said it was not planning on making an offer for the company.

Shares in the London-listed satellite operator rocketed in the previous session after Eutelsat said it was evaluating a possible offer. However, the group - which had until the end of play on 23 July to either announce a firm intention to make an offer for Inmarsat or walk away - said earlier that it does not intend to make an offer.

Under the Takeover Code, Eutelsat cannot make a bid in the next six months without the consent of the panel unless Inmarsat’s board agrees, or a third party announces a firm intention to make an offer.

Inmarsat rallied late on Monday as investors cheered the prospect of a potential bidding war, as the statement from Eutelsat came just weeks after Inmarsat revealed that it had received and rejected a "highly preliminary" and indicative proposal from US rival Echostar.

On 8 June, the company said that Echostar's offer had been rejected on the basis that it "very significantly undervalued" Inmarsat and its standalone prospects.

Shares in the satellite operator also got a boost last week after Echostar disclosed that it had taken a 3% stake.

Ironically, earlier on Tuesday analysts at Kepler had downgraded their recommendation for shares of the French outfit from 'buy' to 'hold', explaining that they were unconvinced of the merits of a tie-up.

"It would further deteriorate ETL's risk and financial leverage profile while financing such a large deal would require a material capital increase," they said.

"In addition, we cannot exclude a fight for control of Inmarsat, which recently rejected an offer from Echostar."

The French broker estimated that Eutelsat would need to raise roughly €1.4bn of fresh capital, which at a 25% discount to the then current share price would see the number of shares increase by about 50%, reducing EPS accretion to about 3%.

At 0940 BST, the shares were down 7.3% to 586.20p.