Canadian Earth Observation Firm Buys Bankrupt RapidEye

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PARIS — A Canadian distributor of optical satellite imagery has purchased Germany’s RapidEye company out of bankruptcy and is looking to develop the now debt-free RapidEye into a major player in the commercial Earth observation market.

Iunctus Geomatics Corp. of Lethbridge, Alberta, whose current business includes being Canada’s exclusive distributor of French Spot optical satellite data, purchased Brandenburg, Germany-based RapidEye for about 13 million euros ($18.9 million), according to two industry officials familiar with the agreement.

The new company, called RapidEye Canada Ltd., has taken over operation of the five identical 150-kilogram RapidEye satellites, which have been in orbit since August 2008. RapidEye generated about 14 million euros in revenue in 2010 and is expected to reach revenue of 18 million euros or more in 2011, according to mid-2011 RapidEye forecasts.

Ryan Johnson, president of Iunctus Geomatics, declined to specify the sales price but said the purchase was equivalent to “a bit more than one times sales” for 2011. He confirmed that RapidEye’s business has improved substantially in 2011 compared with 2010, which was a disappointing year for the company.

In a Sept. 2 interview, Johnson said Iunctus views RapidEye as “a company with a phenomenal potential that was burdened by enormous debt. We are making a commitment to help RapidEye develop. It takes 4 million square kilometers per day of images. No other company matches our revisit time. The market for [Earth observation] data is a hard one, but it has been our business for some time now. For us, this is a natural expansion of our activities.”

Johnson said Iunctus intends to continue investing in RapidEye to permit the company to reach its potential.

With its sales below forecasts in 2009 and 2010, and struggling beneath a debt load that made investment in the business difficult, RapidEye breached several of its loan covenants and was forced into the  German equivalent of Chapter 11 of the U.S. Bankruptcy Code in late May.

Germany’s bankruptcy code, like that in the United States, is biased in favor of maintaining a company as a going concern, even if current debt-holders are wiped out, rather than pushing the company into a fire sale and eventual dissolution, according to Christian Köehler-Ma, a partner with Leonhardt Lawyers Insolvency Administrators Notaries of Brandenburg, which acted as the administrator for the RapidEye bankruptcy.

RapidEye’s creditors, which are mainly German banks, agreed to a cash injection of 300,000 euros in late June to permit RapidEye to continue operating with its approximately 140 employees.

In a Sept. 2 interview, Köehler-Ma said more than 20 companies expressed initial interest in RapidEye, a list that eventually came down to three finalists who competed for the company. The sale to Iunctus was agreed to Aug. 29.

Johnson said RapidEye’s new owners are now reviewing the company’s business to determine a strategy for expansion. Among the near-term decisions will be whether to renew the annual in-orbit insurance on the constellation’s in-orbit health. The existing policy, which expired in late August, had cost RapidEye about 2 million euros per year.

RapidEye’s five satellites are healthy in orbit, and current estimates are that they could remain fully operational until 2018. Given the production and launch cycles for satellites such as this, RapidEye’s new owners likely will need to decide on a successor constellation in 2014, giving them more than two years to evaluate the size of the business.

Johnson declined to discuss whether RapidEye’s current cost structure would be modified in other areas, such as employee head count. Wofgang Biedermann, RapidEye’s chief executive, has stepped down, and Manfred Krischke, who co-founded RapidEye in 1998, will be returning to the company.