Satellite operator Intelsat has signed a definitive agreement to buy the commercial aviation business of Gogo for USD 400 million in cash, subject to the usual adjustments. Gogo said it started looking for buyers earlier this month, after reporting a 55 percent drop in revenues for the second quarter. Intelsat will operate the acquired business as an independent unit based in Chicago and led by current CA president John Wade.
Intelsat said the deal will combine its own global satellite and ground network with Gogo’s installed base of more than 3,000 commercial aircraft, plus its next-generation high throughput space assets with Gogo’s best-in-ckass 2Ku antenna, with the possibility to “redefine the connectivity experience.” Intelsat added that passengers will get an improved in-flight connectivity experience for video streaming, browsing and cloud-based applications from gate to gate. Airline will be able to get a fully integrated platform that is highly reliable, flexible and offering passenger satisfaction.
The aviation business operations include key airline relationships and customer-facing capabilities, including a leading software platform, ISP and network management infrastructure. The business currently serves 21 commercial airlines, including 9 of the top 20 global carriers.
Intelsat will fund the deal using ts existing debtor-in-possession (DIP) financing facility and cash on hand. Intelsat’s DIP lenders have agreed to amend the DIP credit agreement to facilitate the transaction, and Intelsat’s key economic stakeholders support the transaction. The US Bankruptcy Court for the Eastern District of Virginia, Richmond Division, has also given its approval for the transaction, which should close before the end of the first quarter of next year.
Meanwhile, Gogo said that it will remain a public company and use the money raised to improve its net debt position and to push growth opportunities such as Gogo 5G. The company said that with the sale, it will have greater financial flexibility, including a lower cost of capital over time, and will be in a better position to develop its Business Aviation (BA) segment, "uniquely well-positioned in an attractive and underpenetrated market."
As part of the transaction, Gogo will enter into a 10-year network services agreement under which Intelsat will have exclusive access to Gogo ATG services for the CA (commercial aviation) market in North America, subject to minimun revenue guarantees of USD 177.5 million.
