Globalstar to Merge with Metro Fiber Provider FiberLight and Acquire Other Assets in Stock Transaction
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Creates diversified telecommunications infrastructure company with
assets across satellite, spectrum, fiber and related technologies
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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
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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
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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.
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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.
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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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