Ontario Teachers’ Said in Lead for $7 Billion Telesat Deal

Apr 10, 2014 5:10 pm ET

(Updates with lawsuit in 8th paragraph.)

April 10 (Bloomberg) -- Ontario Teachers’ Pension Plan is the front-runner to acquire Loral Space & Communications Inc.’s Telesat Holdings Inc. for about $7 billion including debt, people with knowledge of the matter said.

The Telesat purchase would come in two pieces: buying publicly traded Loral, which owns 63 percent of the company, and acquiring the rest from Canada’s Public Sector Pension Investment Board, which co-owns the satellite operator.

Loral could be bought for more than $80 a share, said the people, who asked not to be identified because the talks are private. The shares rose 4.8 percent to $73.44 at the close in New York, giving the company a market value of $2.3 billion.

Canada Pension Plan Investment Board also has been in talks with both of Telesat’s owners, the people said. Public Sector Pension owns about 37 percent of Telesat and controls about 67 percent of the voting rights. As a result, both Loral and PSP must agree to a deal for a full sale of Telesat.

The discussions signal that Loral’s largest shareholder, Mark Rachesky’s MHR Fund Management, and PSP are working together to get a deal completed. The two co-owners of Telesat were previously not talking with each other, making a joint transaction tricky, according to the people. Rachesky is Loral’s chairman.

A sale could be announced later this month or in early May, the people said.

Michael Bolitho, a Telesat spokesman, declined to comment, as did Deborah Allan, a spokeswoman for Ontario Teachers’ Pension Plan. A representative for PSP didn’t respond to requests for comment, while Linda Sims, a spokeswoman for Canada Pension, declined to comment.

Pending Lawsuit

While the outcome of a lawsuit against Loral is pending, the amount of damages has been capped at less than $300 million, according to one of the people familiar with the situation. ViaSat Inc. sued Loral in 2012 for patent infringement by Space Systems/Loral, a satellite-building unit then owned by Loral. Loral sold SS/L to Canada’s MacDonald, Dettwiler and Associates Ltd. in 2012.

Buyout firms including Apax Partners LLP, KKR & Co. and Carlyle Group LP had looked at buying Telesat, and all have dropped out of the bidding, the people familiar with the situation said. Reuters previously reported that Loral was in talks with Ontario Teachers’ and Canada Pension.

Loral and PSP acquired Telesat from Canadian telecommunications company BCE Inc., a deal announced in December 2006 valued at about $3 billion including debt.

Telesat owns 14 satellites and manages the operations of satellites for third parties, according to its website. The company was founded in 1969 and launched the world’s first commercial, domestic communications satellite in geostationary orbit in 1972.

--With assistance from Katia Dmitrieva in Toronto.