WASHINGTON, May 6 (Reuters) – Satellite imagery company
DigitalGlobe Inc on Sunday rejected a $17-a-share cash
and stock takeover offer from rival Geoye Inc, saying
the hostile bid substantially undervalued the company and its
financial prospects.
“Consistent with its fiduciary duties and in consultation
with its independent financial and legal advisers, the
DigitalGlobe Board of Directors reviewed GeoEye’s unsolicited
acquisition proposal and unanimously determined that it
substantially undervalues the company,” it said in a statement.
DigitalGlobe said the takeover offer also did “not
adequately recognize DigitalGlobe’s superior track record of
financial and operating performance as well as its
constellation’s greater capabilities.”
GeoEye announced the takeover offer on Friday, saying it
decided to press ahead after merger talks between the two
companies broke down. GeoEye Chief Executive Matt O’Connell said
the company was also willing to restructure its offer, which
called for DigitalGlobe shareholders to receive $8.50 in cash,
and 0.3537 shares of GeoEye for each share held.
DigitalGlobe offered a different account, disclosing a
series of negotiations between the companies since February 2012
in which each side has sought to retain control of a combined
company. It called GeoEye’s account of events “materially
misleading and incomplete.”
DigitalGlobe said it had rejected previous unsolicited
takeover bids, but countered with its own proposal to take over
GeoEye in a transaction in which DigitalGlobe’s stockholders
would own approximately 60 percent of the combined company, and
GeoEye stockholders would own about 40 percent.
DigitalGlobe said it halted talks on that proposal after
concluding that the U.S. government’s budget cuts would be more
favorable for DigitalGlobe than GeoEye, but revived it again
after Friday’s takeover bid from GeoEye — only to see GeoEye
reject it again.
“Given GeoEye’s rejection of that proposal, DigitalGlobe
terminated discussions and will await the government reaching
its budget decision regarding EnhancedView,” the company said,
referring to a $7.3 billion program by the National
Geospatial-Intelligence Agency to buy satellite imagery from
both companies.
U.S. defense officials have said that program will be
curtailed sharply beginning in fiscal year 2013; some accounts
project a halving of the orders over the next decade. However,
the budget cuts must still be approved by Congress.
DigitalGlobe said it would reconsider whether to revive its
own takeover bid for GeoEye when further details were available
about the size of future government imagery orders.
DigitalGlobe Chief Executive Jeffrey Tarr said his company
had “consistently demonstrated superior operating performance
compared to GeoEye, including the stronger relative
performance on the EnhancedView program. He said he believed the
most recent GeoEye offer was triggered by concern about its
prospects in competing for future U.S. imagery orders.
DigitalGlobe operates three high-resolution satellites,
while GeoEye has two satellites on orbit.
GeoEye officials say they believe DigitalGlobe may offer
more quantity, but its satellites provide higher-quality imagery
to the U.S. government.
In a letter to GeoEye rejecting its takeover offer,
DigitalGlobe said GeoEye had suffered “repeated, large
holdbacks” against its agreement with the government, which
could indicate “significant shortfalls in performance against
NGA’s requirements.”
DigitalGlobe also said its “dramatically higher organic
growth” as evidenced by its first quarter revenue growth rate of
12 percent, compared to only 3 percent for GeoEye.
