- Creates diversified telecommunications
infrastructure company with assets across satellite, spectrum,
fiber and related technologies
- Forms portfolio of assets that supports
the needs of next-generation networks including connectivity
everywhere, dense small cell deployments, dedicated licensed
spectrum and deep fiber footprint
- Combined entity expected to have a
strong balance sheet with low leverage, significantly reducing the
need for future capital raises and creating long-term value in a
tax efficient manner through the use of Globalstar’s NOLs
- Company to conduct rights offering for
minority shareholders following the closing on the merger
Globalstar, Inc. (NYSE American: GSAT) today announced it
has signed a merger agreement with Thermo Acquisitions, Inc.
pursuant to which the following assets will be combined with
Globalstar: metro fiber provider FiberLight, LLC (FiberLight), 15.5
million shares of common stock of CenturyLink, Inc. (NYSE: CTL)
(CenturyLink), $100 million of cash and minority investments in
complementary businesses and assets of $25 million in exchange for
Globalstar common stock valued at approximately $1.65 billion,
subject to adjustments. Thermo Acquisition, Inc. is controlled by
Jay Monroe, Executive Chairman of the Board of Directors and Chief
Executive Officer of Globalstar. At closing the parent company will
be renamed Thermo Companies, Inc., and its stock will continue to
trade publicly. The transaction has been unanimously recommended by
the Special Committee of the Board of Directors of Globalstar,
consisting entirely of independent directors, and unanimously
approved by the full Board of Directors. The merger is expected to
close in the third quarter of 2018.
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Globalstar to Merge with Metro Fiber
Provider FiberLight and Acquire Other Assets in Stock Transaction
(Graphic: Business Wire)
Jay Monroe, Executive Chairman of the Board of Directors and
Chief Executive Officer of Globalstar and founder and controlling
shareholder of Thermo Capital Partners and its affiliates (Thermo),
said:
“This transaction brings together strategic assets that are
critical to the complex needs of next-generation networks, allowing
service providers to deliver the sophisticated services their
customers increasingly expect. The combined entity is uniquely
positioned to meet a broad range of customer requirements, from low
latency and high capacity networks, to consistent connectivity
across large geographical areas. Long-term shareholders should
benefit significantly from the combined entity’s strong balance
sheet and recurring revenue from the portfolio of satellites,
spectrum, fiber infrastructure and other related assets.”
The combined company will hold a unique set of assets including
Globalstar’s world-wide satellite business with 2017 Adjusted
EBITDA of approximately $32 million and projected pro forma net
debt outstanding of approximately $380 million at closing; a
spectrum management company facilitating transactions related to
Globalstar’s U.S. and international terrestrial spectrum;
FiberLight, a metro fiber provider serving 40 of the top 50 U.S.
bandwidth providers across approximately 14,000 route miles with
2017 Adjusted EBITDA of approximately $67 million based on
unaudited results and approximately $200 million of net debt at
closing; and Thermo Investments, an investment management company
with initial investments in CenturyLink stock valued today at
approximately $275 million, which is expected to provide annual
dividends of approximately $33.5 million, minority investments in
Pivotal Commware and Orion Labs, plus $100 million of investable
cash. Looking forward to the full year 2019, management expects
Adjusted EBITDA1 of the combined entity to be in excess of $165
million and combined net debt2 at December 31, 2019 of less than
$200 million.
Diverse Portfolio of Assets
The merger will organize the pro forma company into four
principal operating subsidiaries under the name Thermo Companies,
Inc. (Thermo Companies) as the public company. These operations
include Globalstar, FiberLight, Global SpectrumCo and Thermo
Investments; refer to associated chart for further details.
Based in Alpharetta, Georgia, FiberLight operates a unique fiber
optic asset base providing dark and lit fiber services over its
footprint of approximately 14,000 route miles across Texas, the
Southeast, Mid-Atlantic and Bay Area providing predominantly
metropolitan high-bandwidth solutions to enterprise and wireless
carriers. The combination of network assets, attractive markets,
quality leadership and disciplined capital deployment has resulted
in a growing revenue base across an expanding footprint. Thermo
originally invested in the fiber industry in 2002 with Xspedius
Management Co.’s (Xspedius) acquisition of e.spire Communications
and spun FiberLight out of Xspedius in 2005. Xspedius was acquired
by Time Warner Telecom in 2006, which subsequently merged with
Level 3 Communications in 2014, and then merged with CenturyLink
last year. Over the past decade, FiberLight grew from a small
operator of individual dark fiber markets to a significant market
participant in the fiber industry with a Tier 1 customer base
represented by some of the largest technology companies, cable
companies and wireless carriers in the U.S.
CenturyLink completed its merger with Level 3 Communications in
November 2017 creating a global leader in network services with
450,000 route miles of fiber, over 100,000 buildings on-net, and a
management team focused on driving significant free cash flow per
share and maintaining its dividend. Thermo Investments will hold
15.5 million shares in CenturyLink with a current value of $275
million and expected annual dividends of $33.5 million. Thermo
Investments also will manage approximately $100 million in cash for
future investments and will deploy this cash in strategies
consistent with Thermo’s history of acquiring asset intensive
businesses at early stages of transformational industry
developments. These investments are expected to include control and
non-control opportunities across capital structures with cash flow
reinvested within Thermo Companies or deployed into new
opportunities. Thermo also will contribute $25 million of other
assets including minority investments in Pivotal Commware and Orion
Labs and the real estate comprising Globalstar’s new headquarters
building, all contributed at cost.
Financial Highlights
The merger is expected to create a fundamentally stronger
company with significantly reduced leverage and diversified
holdings serving the global telecommunications industry. The
anticipated combined Adjusted EBITDA of pro forma Thermo Companies
will be at least 4x standalone Globalstar. The pro forma cash flow
of the combined company will be derived from five principal sources
including (i) satellite operations, (ii) leasing or other
monetization revenue from global spectrum, (iii) FiberLight
operations, (iv) dividend income and (v) other Thermo Investments’
returns. The pro forma company is expected to benefit from
Globalstar’s $1.7 billion U.S. net operating losses allowing growth
in a tax efficient manner. By materially improving the combined
company’s liquidity position, Globalstar believes the merger will
best position the company for monetizing its 2.4 GHz terrestrial
spectrum in addition to maximizing the global opportunities to
participate in terrestrial deployments of all four of its spectrum
bands. Globalstar is currently seeking standardization approval of
its 2.4 GHz spectrum which is proceeding under a “3GPP working
item” with expected approval in the next year.
Globalstar has reached an agreement in principle with its
lenders on an amendment of its BPIFAE (formerly known as COFACE)
senior debt facility, which is subject in all respects to lender
and BPIFAE committee approvals as well as satisfactory final due
diligence. Additionally, final amended terms will be subject to
documentation in a binding agreement to be agreed among the parties
that will be effective concurrent with the closing of the merger.
The agreement in principle provides for annual deferrals of
principal amortization up to $30 million and a fixed margin of
3.25% over 6 month LIBOR, both subject to liquidity tests performed
over time. Additionally, the financial covenants and certain other
terms are expected to be amended. FiberLight is seeking an
amendment to its $255 million senior debt facility with CoBank,
including additional financing capacity to fulfill its current
project backlog. FiberLight is requesting that the refinanced
credit facility retain its favorable 1% annual principal
amortization. Any amended terms are subject in all respects to the
approval of CoBank.
Anticipated Rights Offering for Minority Shareholders
Upon completion of the merger, Thermo Companies expects to
initiate a rights offering of up to $100 million for minority
shareholders. The rights offering would be consummated
approximately 45 days following closing, is expected to be
available to holders of record on the date of closing and will
include an over-subscription privilege allowing for the
subscription of additional shares with allotments otherwise on a
pro rata basis.
Structure & Approvals
As a result of the merger, Globalstar Chairman and CEO Jay
Monroe will increase his beneficial ownership in the pro forma
company from a fully diluted ownership of approximately 58% today
to between 83% and 87% at closing. The final ownership level is
variable based on the 20-day volume weighted average share price
upon close. The issuance price is subject to a collar set at 80%
and 120% of Globalstar’s 20-day volume weighted average share price
on April 24, 2018, the date the Merger Agreement was executed. The
Merger Agreement has been recommended by Globalstar’s Special
Committee of Independent Directors, who were represented by
independent counsel and which retained Moelis & Company
(Moelis) to serve as its exclusive financial advisor. Moelis has
rendered an opinion to the Special Committee that as of the date of
the Merger Agreement, subject to factors and assumptions set forth
in the opinion, that the value to be paid is fair to minority
stockholders of Globalstar from a financial point of view.
Principal Merger Agreement Terms
The merger consideration will consist of shares of Globalstar
common stock with a value of approximately $1.65 billion, subject
to adjustment based on changes to the value of CenturyLink’s share
price between signing and close, FiberLight’s last twelve months
EBITDA at close and FiberLight’s net debt position at close.
Completion of the transaction is subject to the satisfaction of the
conditions set forth in the Merger Agreement, including approval by
the lenders of Globalstar and FiberLight and by Globalstar’s
stockholders. Accordingly, there can be no assurance that this
transaction will be consummated.
Pursuant to the terms of the Merger Agreement, Thermo and its
affiliates who own Globalstar common stock have signed a voting
agreement pursuant to which it and its affiliates have granted a
proxy and/or agreed to vote in favor of the transaction at any
meeting of stockholders. Globalstar expects to seek approval from
its stockholders during the second quarter of 2018, subject to
Securities and Exchange Commission (SEC) review of the
prospectus/proxy statement to be filed by Globalstar for the
proposed transaction.
Additional Information about the Proposed Merger and Where to
Find It
In connection with the proposed transaction, Globalstar will
file materials with the SEC, including a joint proxy
statement/prospectus. Investors are urged to read these materials
when they become available because they will contain important
information about Globalstar, FiberLight and the proposed
transaction. The proxy statement/prospectus and other relevant
materials (when they become available), and any other documents
filed by Globalstar with the SEC, may be obtained free of charge at
the SEC’s web site at www.sec.gov. In addition, investors may
obtain free copies of the documents filed with the SEC by
Globalstar by directing a written request to: Globalstar, Inc., 300
Holiday Square Blvd., Covington, LA 70433 Attention: Investor
Relations. Investors are urged to read the proxy
statement/prospectus and the other relevant materials when they
become available before making any voting or investment decision
with respect to the proposed transaction.
This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
Participants in the Solicitation
Globalstar and its directors and executive officers may be
deemed to be participants in the solicitation of proxies from the
stockholders of Globalstar in connection with the proposed
transaction. Information regarding the special interests of these
directors and executive officers in the proposed transaction will
be included in the proxy statement/prospectus referred to above.
Additional information regarding the directors and executive
officers of Globalstar is also included in its Annual Report on
Form 10-K for the year ended December 31, 2017 and the proxy
statement for Globalstar’s 2018 Annual Meeting of Stockholders.
These documents are available free of charge at the SEC’s web site
(www.sec.gov) and from Investor Relations at Globalstar at the
address described above.
Forward Looking Statement Safe Harbor
This press release contains certain statements that are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements are based on current expectations and assumptions that
are subject to risks and uncertainties which may cause actual
results to differ materially from the forward-looking statements.
Forward-looking statements, such as the structure, timing and
completion of the proposed transaction, future financial and
operating results, benefits and synergies of the proposed
transaction, future opportunities for the combined company, the
ability of the parties to satisfy the conditions to closing
contained in the Merger Agreement, the complete of the 2017
FiberLight audit and the results thereof, and any adjustments to
the merger consideration based on the last twelve month Adjusted
EBITDA of FiberLight and other statements contained in this release
regarding matters that are not historical facts, involve
predictions. Any forward-looking statements made in this press
release are believed to be accurate as of the date made and are not
guarantees of future performance. Actual results or developments
may differ materially from the expectations expressed or implied in
the forward-looking statements, and we undertake no obligation to
update any such statements. These risks, as well as other risks
associated with the transaction, will be more fully discussed in
the proxy statement/prospectus that will be included in the
Registration Statement on Form S-4 that will be filed with the SEC
in connection with the transaction. Additional risks and
uncertainties are identified and discussed in Globalstar’s filings
with the Securities and Exchange Commission, including its Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K.
About Thermo
Thermo was founded in 1984 to develop power plants and natural
gas assets. The cash flow generated from these early energy assets
was deployed across several industries with uncorrelated financial
drivers including real estate, aircraft leasing, industrials,
financial services and telecom. Over the past 30 years, a variety
of investment strategies have been utilized across capital
structures, ranging from internally developed start-up businesses
to late-stage investments. Thermo’s partners are deeply involved in
day-to-day management for primary holdings and have proven
start-up, turnaround and late-stage growth experience across
industries. Thermo typically seeks investments in industries
undergoing periods of transition that may require a longer
investment horizon than is acceptable to other investors. For more
information, visit www.thermoco.com.
About Globalstar, Inc.
Globalstar is a leading provider of mobile satellite voice and
data services. Customers around the world in industries such as
government, emergency management, marine, logging, oil & gas
and outdoor recreation rely on Globalstar to conduct business
smarter and faster, maintain peace of mind and access emergency
personnel. Globalstar data solutions are ideal for various asset
and personal tracking, data monitoring, M2M and IoT applications.
The Company's products include mobile and fixed satellite
telephones, the innovative Sat-Fi satellite hotspot, Simplex and
Duplex satellite data modems, tracking devices and flexible service
packages. For more information, visit www.globalstar.com.
About FiberLight, LLC
FiberLight provides mission critical high bandwidth networks
customized for clients’ specific requirements. FiberLight owns and
operates deep fiber networks in over 30 metropolitan areas in the
U.S. with a concentration in Texas, the Southeast, the Washington
DC corridor, Mid-Atlantic markets and Bay Area. The growing network
currently consists of approximately 14,000 route miles and 26,000
backbone access points. Customers include domestic and
international telecom companies, wireless, wireline, cable and
cloud providers as well as key players across enterprise,
government and education representing 40 of the top 50 bandwidth
providers in the United States. For more information, visit
www.fiberlight.com.
___________________
1 Adjusted EBITDA defined as Globalstar Adjusted EBITDA, plus
FiberLight Adjusted EBITDA, plus dividend income from 15.5 million
CTL shares of $0.54 per share per quarter plus investment income
from Thermo Investments. 2 Includes projected BPIFAE facility
balance at December 31, 2019 plus CoBank facility balance, less
cash and equivalents of the combined entity including 15.5 million
CTL shares assumed at a constant value per share.
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Globalstar, Inc.Samantha
DeCastroInvestorRelations@globalstar.com
Globalstar (AMEX:GSAT)
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