With the completion of Orbimage’s purchase of Space Imaging, the new company that emerged, now renamed GeoEye, will compete head to head with Longmont, Colo.-based DigitalGlobe for U.S. government business and try to expand both that market and its global and commercial businesses.
The purchase price, approximately $58.5 million minus amounts paid by Space Imaging on its existing debt, was financed entirely through debt provided by four existing shareholders, according to Matt O’Connell, president and chief executive officer of GeoEye, who formerly led Orbimage.
Those shareholders are Deephaven Capital Management of Minnetonka, Minn. , Citadel Capital Management Group of Chicago, Farallon Capital Management LLC of San Francisco, and Concordia Capital Corp. of New York.
GeoEye now has the largest archive of satellite imagery in the world, O’Connell said, and the companies’ pro forma combined revenue for 2005 was approximately $160 million.
GeoEye has retained more than 80 percent of Space Imaging’s employees, bringing the company to a total of about 300 employees. Its leaders will include O’Connell; William Schuster as chief operating officer; Henry Dubois as executive vice president and chief financial officer; William Warren as vice president, general council and corporate secretary; and Timothy Puckorius as senior vice president of international marketing and sales.
The remainder of the team will be announced shortly, according to Mark Brender, formerly of Space Imaging, who is now serving as GeoEye’s vice president of marketing and communications.
Space Imaging’s Thornton, Colo., headquarters will be retained by GeoEye and likely will be expanded in the future because of the high price of real estate surrounding Orbimage’s Dulles, Va., headquarters, company officials said.
Regulatory approval of the merger was granted Dec. 22. The public announcement that the deal had closed occurred Jan. 12.
“It wasn’t a pro forma proceeding, but the government did a very thorough job and did it very promptly,” O’Connell said. “We couldn’t close the transaction at year end because we were waiting for a couple of regional affiliates to get their paperwork together.”
With the acquisition, GeoEye has a network of over a dozen international affiliates, having recently added one in Brazil, O’Connell said. The company might make some changes about which affiliates it will retain as it moves forward.
“There will be a reshuffling of the deck to a certain extent,” O’Connell said. “In general, affiliates with ties to their government tend to be very strong and very well funded, without conflicted views about their role, while some of the commercial affiliates overseas don’t have as clear a vision. Where an affiliate is uncertain about where it wants to go in the future, we might make it easy for them to decide.”
The company’s goals post-merger include urging other government agencies beyond the National Geospatial-Intelligence Agency to start integrating commercial remote sensing products into their work, and to become major players in the international field, O’Connell said.
The next coordination step in the process of merging the two companies’ operations will be integrating their data archives, O’Connell said.
GeoEye will operate three high-resolution satellites — Orbview-3, Ikonos and OrbView-2. The 0.41-meter-resolution OrbView-5 is slated for launch in early 2007, and GeoEye plans to build a next-generation imagery satellite as well, though still is deciding whether it will more closely resemble the Ikonos or Orbview model , O’Connell said.
“Without a deal like this, it would be almost impossible to get another next-generation satellite financed,” said analyst Ed Jurkevics of Chesapeake Analytics of Arlington, Va. “We’ve finally hit a stability point for this industry.”
Of the new name, O’Connell said: “We thought we’d do a little pun on geoinformation and geointelligence. It does invoke what we do; we have ‘eyes’ that see the whole world.”
The new deal means stiffer competition for DigitalGlobe , the other remaining U.S. operator of high-resolution imaging satellites. Jurkevics predicted DigitalGlobe to take a significant revenue hit in 2006, but to bounce back in 2007 when it is the first of the two companies to launch a next-generation satellite.