PARIS — Satellite ground-technology provider ViaSat Inc. has agreed to purchase consumer satellite broadband provider WildBlue Communications for $568 million in a deal that removes the possibility the two longtime partners will become competitors once ViaSat’s own high-volume broadband satellite is launched in 2011, the companies announced Oct. 1.
The transaction, for which Carlsbad, Calif.-based ViaSat does not need the approval of its shareholders, will force ViaSat to take on further debt as it continues to finance its ViaSat-1 satellite.
ViaSat said WildBlue has about $68 million in cash and that an additional $125 million in purchase costs will be paid in ViaSat stock The remaining $375 million will be financed in part from ViaSat’s existing cash on hand, and from bank debt.
ViaSat said it has agreed with WildBlue creditors on the terms of a four-year loan for $350 million if ViaSat cannot secure better terms from its own bankers.
ViaSat has been supplying Denver-based WildBlue with consumer satellite broadband terminals for nearly a decade. But the two partners appeared on a collision course when ViaSat, frustrated that WildBlue was not racing to build additional satellite capacity to meet surging demand, ordered its own satellite.
ViaSat persuaded its skeptical shareholders that the $400 million ViaSat-1 project would aim vast amounts of bandwidth at exactly those regions in the United States where WildBlue’s satellite beams were sold out. In addition, ViaSat has positioned ViaSat-1 as offering substantial Ka-band capacity to the U.S. military for training missions involving manned and unmanned aircraft.
ViaSat-1, under construction at Space Systems/Loral of Palo Alto, Calif., will offer a tenfold increase in bandwidth to WildBlue’s current capacity, and 20 times more capacity in those areas of the United States where WildBlue has seen highest demand.
WildBlue and ViaSat have been working to squeeze extra capacity out of the current WildBlue space segment, but WildBlue in the past has been forced to refuse new subscribers in certain regions because its satellite beams pointed there were sold out. WildBlue operates its own satellite and has leased Ka-band capacity aboard Telesat Canada’s Anik F2 satellite and also aboard EchoStar Corp.’s AMC-15 satellite to increase capacity.
One of WildBlue’s problems has been that its customers have increasingly selected the higher-end subscription packages, which further increases the strain on WildBlue’s capacity.
WildBlue competitor Hughes Network Systems of Germantown, Md., reaching the same demand-forecast conclusions as ViaSat, has ordered its own large all-Ka-band satellite, called Jupiter, which Hughes expects to launch in 2012. This is in addition to the Ka-band Spaceway 3 satellite currently operated by Hughes.
WildBlue reported 2008 revenue of $187 million and EBITDA, or earnings before interest, taxes, depreciation and amortization, of $44 million. The company has said it expects 2009 revenue to be $210 million, with EBITDA climbing to $85 million.
In their joint announcement, ViaSat and WildBlue said WildBlue’s expected cash flow is sufficient to more than cover the costs of the transaction, and also will help finance ViaSat-1’s development. They said WildBlue generated $52 million in free cash flow for the 12 months ending June 30, 2009.
