Artel To Merge with Skyport and Go Public

WASHINGTON


—


Artel
Inc., one of three companies that broker commercial satellite services for the Pentagon, will merge with teleport operator Skyport Global Communications in a transaction that would create a publicly traded company incorporated in Canada, according to a Sept. 28 filing with Canadian regulatory authorities.

The new company, called Lavell Systems Inc., is backed by Balaton Group Inc., a Toronto-based private-equity firm that owns Skyport’s parent company, SkyComm Technologies Corp. Lavell, which has a




wholly owned subsidiary incorporated in Delaware, will acquire Artel for $155 million, according to the preliminary prospectus for the new company.

According to the prospectus – posted on System for Electronic Document Analysis and Retrieval, an Internet clearinghouse for regulatory filings by Canadian public companies and investment houses – Lavell Systems is a Canadian company but will have its headquarters in Reston, Va.

Lavell
also said it has signed a nonbinding letter of intent




to acquire Segovia, a Delaware-based provider of secure satellite services to the U.S. military and homeland security markets, for between $50 million and $80 million. Segovia’s primary offices are in Herndon, Va.

The Artel acquisition is expected to close by Oct. 31, pending approval by Canadian and U.S. regulatory authorities. Lavell hopes to complete its public offering by that time, the prospectus said.

According to the prospectus, Lavell intends to list its shares on the Toronto Stock Exchange.

Artel of Reston




is one of three companies that arrange commercial satellite solutions for U.S. Defense Department customers under the Defense Satellite Transmission Services-Global (DSTS-G) contracting vehicle. The DSTS-G contractors – Artel, Arrowhead Global Solutions and Spacelink International – have prospered in recent years as U.S. military demand for commercial satellite services has skyrocketed.

Artel
is the last of the independents among the DSTS-G contractors, who do not own satellites but instead lease capacity from vendors such as Intelsat and SES to cobble together telecommunications solutions for a given Pentagon requirement. Arrowhead was acquired earlier this year by private-equity investor CapRock, whileSpacelink was purchased in 2004 by Engineered Support Systems, now a subsidiary of DRS Technologies.

The DSTS-G program is administered by the Pentagon’s Defense Information Systems Agency. More than $2 billion is available to the program over a 10-year period that began in 2001.

According to the prospectus,




Lavell
Systems was formed July 3




, with Balaton Group as the principal financial backer. Balaton, which invests in what it calls undervalued companies, purchased Houston-based Skyport out of bankruptcy in 2005 and restructured the company.

In the prospectus, Lavell describes itself as a global, single-source provider of satellite telecommunications and network services whose primary customer is the U.S. government. In addition to the Pentagon, Lavell has multiyear contracts with the U.S. Department of State and the General Services Administration.

Lavell
also has an Enterprise Solutions unit and plans to create a Broadcast & Media division in the next 12 to 18 months, according to the prospectus.

For the 12-month period ending Dec. 31, Artel had pro forma revenue




of $152.9 million, with earnings before interest, taxes, depreciation and amortization (EBITDA) of $11.3 million. During that same period, SkyComm had $8.6 million in revenue




and a negative EBITDA margin of $3.6 million.