24 December 2022

Space-Imagery Firm Maxar to Go Private

ROSS WILKERS

Maxar Technologies unveiled its current identity and branding to the world five years ago as a pure-play, publicly traded space company whose business touches nearly all aspects of it.

That name and five decades of history behind it is about to enter a new phase with Friday's announcement that Maxar has agreed to be acquired by private equity firm Advent International for nearly $4 billion in cash, or $53.00 per share.

After including debt, the enterprise value becomes $6.4 billion in a transaction all parties expect to close in mid-2023.

Earth imagery, the satellites that transmit those pictures, geospatial data and analytics, and other software solutions related to mapping are all in Maxar's wheelhouse. Images of what is taking place on the ground in Ukraine often come from Maxar, for instance.

U.S. government agencies, satellite network operators, and GPS navigation service providers all acquire imagery and other data from Maxar. Revenue for Maxar's most recent fiscal year totaled nearly $1.09 billion, of which nearly 64% came from U.S. government agencies.

Maxar has long been the main provider of commercial satellite imagery to the U.S. government over multiple decades.

The company will be one of three providers under a new multibillion-dollar contract vehicle they all signed earlier this year with the National Reconnaissance Office, which is responsible for running that acquisition on behalf of the U.S. government.

But Maxar is also in the midst of a critical juncture as the company moves to go private, given the pending launch of the first two satellites in its WorldView Legion constellation for Earth imagery collection and transmission.

In a Nov. 7 earnings call with investors, Maxar CEO Dan Jablonsky said the company expected to launch those satellites in January after the planned shipment of them to the facility sometime in December.

WorldView Legion will eventually have eight satellites in orbit after they all launch, but Maxar said in the Advent announcement it is also looking "to accelerate investments in next-generation satellite technologies and data insights that are vital to the company’s government and commercial customers."

Enter into that equation some of Maxar's moves in recent years to incorporate other technologies and capabilities that augment the imagery.

That included the full takeover in 2020 of Vricon, a business focused on developing image processing and analytics tools to better create three-dimensional maps and other products.

Having a new owner like Advent is intended to give Maxar a new, and different source of capital outside the public markets, to do more of that.

"As a private company, we will have enhanced flexibility and additional resources to build on Maxar’s strong foundation, further scale operations and capture the significant opportunities in a rapidly expanding market," said Maxar CEO Dan Jablonsky, who has led the company for the past three years including through a restructuring and refocusing of its strategy.

Advent has a foothold already in the U.S. defense market through its ownership of Cobham Advanced Electronic Solutions and Ultra Electronics Group, respectively acquired in 2020 and this year.

The private equity firm has invested roughly $28 billion in the defense, security and cyber verticals over the last three years that include the Cobham and Ultra purchases. Earlier this year, Advent closed its 10th fund at a hard cap of $22 billion raised.

It is only day one, but it sure looks like Advent and Maxar have big and ambitious plans for each other.

More on the agreement itself

At $53 per share, the cash portion of the transaction represents a premium of nearly 34% over Maxar's 52-week high for its stock price.

While Advent is leading the acquisition of Maxar, the private equity firm is not the only player involved on the buy side. Canada-based public sector pension plan British Columbia Investment Management Corp. will also own equity in Maxar through a $1 billion equity contribution.

Canada takes up a significant portion of Maxar's history that can be viewed in this story from 2017, when the company started with that identity.

The agreement includes a 60-day “go-shop” period expiring on Feb. 14, during which Maxar's board of directors and advisers can actively seek and consider alternative acquisition proposals from other potential buyers.

Maxar's board can terminate the agreement with Advent to enter into a superior proposal. The breakup fee on Maxar's end if that happens before Feb. 14 is $51.9 million, which nearly doubles to $124.5 million if the board accepts another bid it deems superior after that date.

The $124.5 million figure also applies if Maxar terminates the agreement with Advent for other reasons than another bid, while Advent's termination fee is $249 million.

J.P. Morgan is acting as the financial adviser to Maxar with Wachtell, Lipton, Rosen & Katz as the legal counsel. Milbank LLP is also a legal adviser to Maxar regarding certain space industry and regulatory matters.

Goldman Sachs and Morgan Stanley are the financial advisers to Advent. Weil, Gotshal & Manges LLP is lead counsel to Advent. Covington & Burling LLP is also advising Advent on the legal piece regarding certain regulatory matters.

Skadden, Arps, Slate, Meagher & Flom LLP is lead counsel to BCI. Freshfields Bruckhaus Deringer LLP is also a legal adviser to BCI regarding certain regulatory matters.

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