U.K. Intervenes in Inmarsat Sale on National Security Basis

(Bloomberg) -- The U.K. government is intervening in the $3.4 billion sale of satellite operator Inmarsat Plc to a group of funds on national-security grounds.

The decision follows a recommendation last week by the Competition and Markets Authority to test whether the takeover announced in March raised public-interest concerns or could endanger national security.

The regulator has until Sept. 17 to prepare a report on the competition and national-security aspects of the deal for Jeremy Wright, the secretary of state for Digital, Culture, Media and Sport, according to a statement from his department on Monday. Inmarsat shares fell 1.4% to 554.20 pence as of 8:12 a.m. in London.

The consortium of funds proposing to buy Inmarsat has been seeking to win over U.K. officials. They made voluntary, legally binding pledges last week to keep strategic decisions regarding the company in the U.K. and to hold onto Inmarsat operations identified by the government as important to the country.

The group, which includes Apax Partners, Warburg Pincus, Canada Pension Plan Investment Board and Ontario Teachers’ Pension Plan, is seeking to buy Inmarsat via a joint-venture company owned in equal shares, Connect Bidco Ltd. Apax was part of a consortium of investors that bought Inmarsat in 2003 and took it public two years later.

The consortium isn’t expecting significant issues to arise in the review and sees the intervention as normal for a transaction of this size, according to people familiar with the bidders’ thinking. They asked not to be identified discussing a sensitive matter.

Representatives for Inmarsat, Warburg Pincus, the Canada Pension Plan Investment Board and the Ontario Teachers’ Pension Plan declined to comment.

What Bloomberg Intelligence Says

“The U.K. government’s decision to refer the takeover of Inmarsat by Connect Bidco to the Competition and Markets Authority on national security grounds is surprising given the fact that some of the putative new owners have owned the company before and its relevance to defense and security hasn’t significantly increased, in our view.”
--John Davies, telecom analyst
Click here to view the research

Wright considered the views of his counterparts in Defence, Business, Enterprise and Industrial Strategy, and the Foreign and Commonwealth Office in deciding to intervene, according to the statement.

U.K. government interventions on national-security grounds are rare. New rules were introduced one year ago, to make it easier to block takeovers of companies when officials are concerned about risks to national security, specially when sensitive technology is being acquired by foreign bidders.

Inmarsat’s satellites link critical government functions, including naval operations, border security and emergency services, in Britain and dozens of other countries such as the U.S. Its commercial operations face growing competition from traditional rivals, such as ViaSat Inc., and new challengers including the Richard Branson-backed OneWeb and Elon Musk’s SpaceX, which offer smaller, cheaper satellites.

To contact the reporters on this story: Angelina Rascouet in Paris at arascouet1@bloomberg.net;Paula Sambo in Toronto at psambo@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Rob Golum

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