Loral Liquidation Looms
Loral is a holding company with two principal assets: (1) a 62.8% economic stake (only 37% voting control) in Canadian fixed satellite services (“FSS”) operator, Telesat; and (2) a 56% share of XTAR. For all intents and purposes, the Telesat stake drives the overwhelming portion of Loral’s remaining value, and will be the subject of the study today.
Executive Summary:
– News reports over the last month suggest that a value unlocking transaction for Loral (LORL) is knocking on the door.
– A key catalyst includes the upcoming patent damages trial (March 25 start date) with ViaSat (VSAT). Resolution of the ViaSat matter would facilitate a Loral transaction by reducing uncertainty around legal obligations.
– Multiple bidders appear to be interested in Loral’s principal asset, a 62.8% stake in Telesat.
Loral remains tasty investment fare for value-oriented, event-driven investors. While the shares have enjoyed a terrific run over the last several years, it appears like the final act in the Loral story is about to unfold.
Based on recent news reports (here and here) and the latest 10-K filing, it appears like Loral has its ducks in a row to sell the business.
Hat tip to Chris Demuth Jr. for pointing out the following language in the 10-K:
“We have explored, are exploring and expect in the future to explore various strategic transactions; this process may have an adverse effect on our financial condition and results of operations whether or not a transaction is ultimately consummated.
Since the Sale, Loral’s principal asset continues to be its majority ownership interest in Telesat. With the goal of maximizing shareholder value, we have, with the agreement of our Canadian co-owner, Public Sector Pension Investment Board (“PSP”), commenced a process to explore potential strategic transactions involving the possible monetization of Loral’s interest in Telesat [emphasis added]. The exact structure of any such transaction has not yet been determined. As currently contemplated, such a transaction would be accomplished through a disposition of Loral itself and would likely require the negotiation of a new shareholders agreement between the potential acquiror of Loral and PSP. There can be no assurance as to whether, when or on what terms a strategic transaction involving Telesat or Loral may occur, or that any particular economic, tax, structural or other objectives or benefits with respect to any transaction involving Telesat or Loral’s interest therein will be achieved.”
Readers should note that there were slight changes to the language in the financial disclosures from the prior year, including acknowledgment of an agreement that was reached with PSP who maintains voting control over the business. This should be viewed as a positive sign as the PSP will likely need to approve any potential acquirer of Loral.
