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Stratos Announces Plans for Completion of Xantic Acquisition31 January 2006
Stratos Global Corporation (TSX: SGB), a leading global provider of advanced mobile and fixed-site remote communications solutions, today announced that it expects to complete its pending acquisition of Xantic B.V. in mid-February.
"The acquisition of Xantic is proceeding as anticipated," said Jim Parm, president and chief executive officer of Stratos. "We look forward to the successful conclusion of this transaction, and to moving forward together as the clear global leader in essential communications solutions for the diverse customer base that we serve on land, in the air, and at sea."
Stratos expects to finance the acquisition of Xantic and refinance its existing debt through the issuance of US$270 million of new senior secured credit facilities and an offering of US$150 million of high-yield senior notes. The new senior secured credit facilities will consist of a five-year US$25 million revolving operating facility, a five-year Term A facility of up to US$20 million, and a six-year Term B facility of up to US$225 million. The proceeds from the Term B loan will be used, in part, to repay outstanding debt, as of December 31, 2005, of US$163.5 million under the Corporation's existing senior credit facilities. The revolving operating and Term A facilities will initially be undrawn.
Xantic Acquisition
Xantic was the third largest provider of Inmarsat services in 2004, accounting for approximately 19% of Inmarsat's mobile satellite telecommunications revenue in 2004. On a pro forma basis, Stratos/Xantic revenue derived from the distribution of Inmarsat services would have accounted for approximately 44% of Inmarsat's mobile satellite telecommunications revenue in 2004, nearly twice that of the next most significant provider of Inmarsat services.
Pursuant to the share purchase agreement dated December 28, 2005, the purchase price payable at closing is US$191.3 million, subject to post-closing adjustments based on Xantic's EBITDA for the 12 months ended December 31, 2005. Based on Xantic's unaudited statement of operations for the nine months ended September 30, 2005, Stratos estimates there would be a positive EBITDA purchase price adjustment for the 12 months ended December 31, 2005, of approximately US$20.0 million. Stratos expects that this adjustment would be funded from cash acquired from Xantic, which is estimated at US$27.2 million based on Xantic's unaudited balance sheet as of September 30, 2005.
Post-acquisition Synergies
With the acquisition of Xantic, Stratos expects to realize between US$20 and US$25 million in annual operating expense and capital expenditure synergies within 24 months of completing the transaction. The expected synergies consist of between US$5 and US$6 million in lower costs of goods and services from greater volume-based price discounts from Stratos' primary supplier, Inmarsat; between US$7 and US$9 million in lower operating expenses through the consolidation of network and IT infrastructure; between US$4 and US$6 million in lower operating expenses associated with the rationalization of sales and marketing, product development, customer service, accounting and finance, and other back office functions; and, between US$4 and US$5 million in reduced capital expenditures resulting from the rationalization of network and IT infrastructure.
The Corporation anticipates that one-time cash integration costs, excluding transaction costs, over the 24-month period following the transaction will be between US$20 and US$25 million, with approximately 75 percent of the costs to be incurred in the first 12 months. In addition, the Corporation expects to incur after-tax, non-cash write-offs in the first quarter of 2006 totaling approximately US$24 million, most of which will relate to rationalization of post-acquisition land earth station infrastructure.
Pro Forma Consolidated Financial Information
On a pro forma basis, after giving effect to the acquisition of Xantic, the refinancing of Stratos' senior secured credit facilities and the issuance of the senior notes, Stratos, when combined with Xantic, would have had revenue of US$552.0 million and adjusted EBITDA of US$92.7 million for the year ended December 31, 2004; revenue of US$426.0 million and adjusted EBITDA of US$68.2 million for the nine-month period ended September 30, 2005; and revenue of US$560.2 million and adjusted EBITDA of US$94.1 million for the 12 months ended September 30, 2005. On a pro forma basis, as of September 30, 2005, Stratos would have had total assets of US$814.8 million. A copy of Stratos' pro forma consolidated financial statements will be filed with SEDAR subsequent to the closing of the Xantic acquisition.
Adjusted EBITDA is a non-GAAP financial measure, defined as net earnings (loss) before interest expense, income tax expense, depreciation and amortization, equity in earnings of investee, non-controlling interest and other costs (income). For the nine and 12 month periods ended September 30, 2005, Adjusted EBITDA also reflects the exclusion of the estimated effect of hurricanes Katrina and Rita on our operations in the third quarter of 2005. With respect to the nine and 12 month periods ended September 30, 2005, that give pro forma effect to the transactions, Adjusted EBITDA removes the impact of certain non-recurring items that positively impacted Xantic's results for the first nine months of 2005, including bad debt recoveries and various customer and supplier settlements.
Fourth Quarter 2005 Financial Results
Stratos' adjusted EBITDA for the nine-month period ended September 30, 2005, was US$44.3 million. Stratos expects adjusted EBITDA for the three-month period ended December 31, 2005, will be generally consistent with the average quarterly results for the nine-month period ended September 30, 2005.
About Stratos
Stratos Global Corporation (www.stratosglobal.com) is a publicly traded company (TSX: SGB) and the leading global provider of a wide range of advanced mobile and fixed-site remote communications solutions for users operating beyond the reach of traditional networks. With its owned-and-operated infrastructure and extensive portfolio of industry-leading satellite and microwave technologies (including Inmarsat, Iridium, Globalstar, MSAT, VSAT, and others), Stratos serves the voice and high-speed data connectivity requirements of a diverse array of markets, including government, military, energy, industrial, maritime, aeronautical, enterprise, media and recreational users throughout the world.
Caution Concerning Forward-Looking Statements
This document contains statements and information about potential future circumstances and developments. Such statements and information are qualified by the inherent risks and uncertainties surrounding future expectations generally and may differ materially from Stratos Global Corporation's actual future results. For additional information with respect to these risks and uncertainties, reference should be made to the Corporation's continuous disclosure materials filed with Canadian securities regulatory authorities. Stratos Global Corporation disclaims any intention or obligation to update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise.
THIS ANNOUNCEMENT IS NOT AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES. NO SECURITIES HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT TO BE OFFERED FOR SALE IN THE UNITED STATES. SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE U.S. SECURITIES ACT OR AN EXEMPTION FROM REGISTRATION. STRATOS GLOBAL CORPORATION DOES NOT INTEND TO REGISTER ANY PORTION OF THE OFFERING OF ANY SECURITIES DESCRIBED IN THIS PRESS RELEASE IN THE UNITED STATES. ANY PUBLIC OFFERING OF SECURITIES TO BE MADE IN THE UNITED STATES WILL BE MADE BY MEANS OF A PROSPECTUS.
%SEDAR: 00003648E
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Source: newswire
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