What next for Inmarsat after rejected Echostar bid?

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Inmarsat's City Road, London, Headquarters.
Inmarsat’s City Road, London, headquarters.

Anyone watching the UK stock market can’t have failed to notice the roller coaster ride that Inmarsat has had over the past few weeks.

From a low of 340.4p in April 2018, to a high of 632.2p just a couple of months later, at the time of writing it was trading at 525.9p.

But why the turbulence with the inflight connectivity provider’s share price?

Inmarsat’s share price has been in the doldrums for some time. It hit a high of 1137p in December 2015, just a month or so after Singapore Airlines announced it had chosen SITAONAIR for high-speed inflight connectivity on its long-range fleet, using Inmarsat’s GX Aviation satellite network.

This in turn was only a couple of months after the APEX Expo when Inmarsat announced it had signed Lufthansa to be the first network airline in Europe to offer GX connectivity on board its short and medium-haul flights.

But the share price then started a long-term decline culminating in the April 2018 low.

The “FT” says Inmarsat’s shares have come under pressure as its legacy business has dwindled while sales of its newer broadband services “have not yet offset those declines”. It also cut its dividend and suffered a shareholder revolt over pay.

The company’s shares were hit further in May 2018 on news that the UN’s International Maritime Organisation (IMO) had ended Inmarsat’s monopoly on satellite services for the Global Maritime Distress and Safety System (GMDSS).

Iridium Communications said its mobile-satellite system had been recognised by the IMO for GMDSS use. The IMO also approved a request by Chinese group BeiDou Navigation Satellite System for evaluation of its GMDSS proposal.

But the lower share price then attracted interest from a potential suitor.

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EchoStar said on 3 July that it had made a £5.32 per share bid for Inmarsat, valuing the company at around £3.2 billion. Inmarsat rejected the bid a day later, saying the bid “significantly undervalued the company and its standalone prospects”.

Following the rejection, however, EchoStar reportedly said it would continue to pursue Inmarsat in the hope of landing a recommended offer.

Inmarsat then rejected an improved cash-and-shares offer from Echostar. Eutelsat said it too was considering an offer to rival that of EchoStar, but pulled out after its plan was publicly revealed.

According to “The Guardian”, analysts at RBC Europe believe it will take a bid of “at least” 750p to gain board or shareholder approval.

Under takeover rules, EchoStar cannot now revive its approach for six months, unless another suitor makes an offer for Inmarsat, the British company invites Echostar back; or there is “a material change of circumstances”.

Meanwhile, on the inflight connectivity front the company continues to offer its GX Ka-band solution, which has now been selected by a range of airlines including Qatar, Singapore, Lufthansa, Norwegian, Air Astana, Air New Zealand, and AirAsia.

And its European Aviation Network (EAN) hybrid air-to-ground/satellite solution should launch very soon with IAG.

EAN is also being made available to business aviation, and Inmarsat’s SwiftBroadband-Safety product entered commercial service in April 2018.

What happens next, in terms of any potential takeover bid or share price movement, is anyone’s guess.

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