Loral to Sell SS/L to MDA in a Transaction That Delivers More Than US$1 Bn of Pre-Tax Value to Loral

Loral Space & Communications Inc. (NASDAQ: LORL) today announced its entry into a definitive agreement with MacDonald, Dettwiler and Associates Ltd. (TSX: MDA) related to the sale of Loral's wholly-owned subsidiary, Space Systems/Loral (SS/L). The transaction provides for Loral to receive consideration from MDA of US$875 million and cash dividends and other payments from SS/L which are expected to be in excess of US$135 million under a formula described below.

The principal components of the transaction include:

  • MDA's purchase of all of the equity of SS/L for US$774 million, payable in cash;
  • MDA's purchase of certain real estate used in connection with SS/L's business for US$101 million, payable through a bank guaranteed three year promissory note;
  • Cash dividends and other payments from SS/L to Loral equal to approximately US$112 million (representing the amount of SS/L's cash balances as of March 31, 2012) plus an incremental per diem amount (equating to approximately US$5.8 million per month) from March 31, 2012 to and including the closing date of the transaction; and
  • The transaction includes other potential adjustments, and Loral will retain principal responsibility for the ViaSat litigation.

"Combining the world-recognized communications capabilities of MDA with SS/L creates a powerful space communications leader and enhances the business prospects, both commercial and government, for each of MDA and SS/L," said Michael B. Targoff, Chief Executive Officer of Loral Space & Communications. "With this transaction, SS/L's employees, customers and suppliers should be confident as to the long term prospects and direction for this highly valued contributor to the global communications infrastructure."

"Both Space Systems/Loral and MDA are already important suppliers to the worldwide satellite industry," said John Celli, President of Space Systems/Loral. "The combination is a very good strategic fit for both companies. Together, we will be in an even stronger position to support the growth requirements of both new and existing customers."

"We are pleased with the transaction and proud of our management team's success in solidifying SS/L's position as the leading commercial satellite provider in the world," said Dr. Mark Rachesky, Chairman of the Board of Directors of Loral. "We look forward to completing this transaction, as it validates the Board's continued commitment to realizing significant value for all Loral shareholders."

The agreement between Loral and MDA has been approved by the Boards of Directors of each of Loral and MDA. The sale is expected to close later this year after the receipt of certain regulatory approvals and the satisfaction of other customary closing conditions. RBC Capital Markets has provided fully committed debt financing to MDA in connection with the transaction.

Loral and its Board of Directors intend to evaluate alternatives for returning to shareholders the after-tax proceeds resulting from the divestiture of SS/L.

In connection with the transaction, Credit Suisse and J.P. Morgan acted as financial advisors and Willkie Farr & Gallagher LLP acted as legal advisor to Loral.

Source: Loral Space & Communications Inc.
Date: Jun 27, 2012