Intelsat, the operator of the world’s largest satellite fleet and connectivity infrastructure, has entered into a definitive agreement to acquire the commercial aviation business of inflight broadband connectivity provider, Gogo, for US$400 million in cash.
The transaction forms part of Intelsat’s strategy to grow its commercial inflight connectivity market, pairing its high-capacity global satellite and ground network with Gogo’s installed base of more than 3,000 commercial aircraft. Key benefits for Intelsat include Gogo’s airline relationships (it currently serves 21 commercial airlines, including nine of the top 20 global carriers), its software platform, 2Ku antenna technology, ISP and network management infrastructure.
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 commercial aviation market in North America, subject to minimum revenue guarantees of US$177.5 million. Intelsat intends to operate the commercial aviation business as an independent business unit, remaining at its Chicago base with current president John Wade staying at the helm.
“Consumer demand for in-flight connectivity is expected to grow at a double-digit rate over the next decade, notwithstanding the impact of Covid-19. The addition of Gogo’s commercial aviation business provides compelling strategic value for our stakeholders and makes strong commercial sense,” said Intelsat’s CEO, Stephen Spengler. “Gogo’s business is a perfect fit with Intelsat’s expansive satellite network and infrastructure due to the breadth of Gogo’s technological solutions, global reach and operational excellence.”
“A priority growth objective for Intelsat is to extend our reach closer to the millions of customers who use our satellite capabilities to stay connected around the world. The addition of Gogo’s commercial aviation business is a significant step toward this goal,” added Spengler. “We are growing beyond satellite connectivity to expand into consumer-optimised managed services.”
The transaction details
Intelsat intends to fund the US$400 million transaction using its 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. On 31 August, 2020, the US Bankruptcy Court for the Eastern District of Virginia, Richmond Division, approved Intelsat’s consummation of the transaction.
The transaction is expected to close before the end of the first quarter of 2021, subject to regulatory approvals and other customary closing conditions.