Skynet, Telesat Merger To Close in Late Summer

The merger of Telesat Canada’s and Loral




Skynet’s telecommunications satellite fleets will save between 45 million and 70 million Canadian dollars ($41.5-$64.5 million) per year as the two companies




merge such operations as




satellite-management and




marketing, according to




Loral Space and Communications Chief Executive Michael Targoff.

In an occasionally hostile May 22 meeting with shareholders who are upset about




Loral management’s handling of a $300 million preferred-stock sale to the company’s largest shareholder, Targoff said the Telesat-Loral sale should close by late summer. The resulting company, to be called Telesat, will have 12 in-orbit satellites and three satellites under construction, and will be the world’s fourth-largest satellite-fleet operator in terms of both revenues and available transponders.

Loral will have 64 percent economic ownership of Telesat and 33.3 percent voting rights. The corresponding ownership will be held by a Canadian pension fund in keeping with Canadian law requiring Canadian ownership of telecommunications carriers like Telesat.

New York-based Loral’s satellite-manufacturing division, Space Systems/Loral, of Palo Alto, Calif., continues to review plant-expansion possibilities to handle its order backlog of 16 telecommunications satellites. Targoff said the company would not necessarily build its own new facility, but could utilize existing capacity owned by some other company.

Lockheed Martin Space Systems has a large facility nearby Space Systems/Loral, in Sunnyvale, Calif. Targoff did not mention Lockheed Martin or any other California-based company that might




have spare plant space available to be leased.

Targoff
said that by Loral’s count, Space Systems/Loral has won 35 percent of the high-power commercial telecommunications satellites awarded worldwide since 2003, meaning satellites with on-board power of more than 8 kilowatts. Loral has won contracts for 19 such satellites, followed by ThalesAlenia Space of France, with 10 high-power satellite orders; Astrium Satellites of Europe (10); Lockheed Martin Commercial Space Systems (eight); Boeing Satellite Systems International (seven




); and China Aerospace Corp., with one order.

The exact count is a subject of debate, but no one disputes the fact that Space Systems/Loral has been the most successful commercial-satellite manufacturer in the past several years.

Loral’s decision to offer $300 million in preferred stock to MHR Capital Partners, which already has a dominant stake in the company, has produced several shareholder lawsuits and was the subject of a couple of tense exchanges between Targoff and shareholders during the May 22 meeting. Shareholders expressed continued frustration both at the terms of the deal, and at the fact that Loral will have to pay up to $5 million defending itself against the lawsuits before its insurance policy assumes the costs.

Targoff
declined to comment on the preferred-stock agreement, saying it is




under litigation.