New York (NY) – In a move that can only be described as pure business brilliance, once bankrupt satellite network operator and satellite phone carrier Iridium Satellite agree to $591 million acquisition through investment firm GHL Acquisition. The Iridium name will be kept intact, the company will be debt free and go public, the original developer Motorola will have lost billions and the group around investor Dan Colussy, who purchased the bankrupt network from Motorola in 2000, will have increased their investment by 24x.
In March of this year, we ran a story about the comeback of Iridium, its changed business focus and how it has been gaining strength, following the dream of Motorola engineer Barry Bertiger, who came up with a first concept of Iridium back in 1987. The dream did not last long for Motorola. Less than a year after the launch of the 72-satellite network, Iridium defaulted on a $1.5 billion loan in August of 1999. Motorola felt that the situation of Iridium was hopeless and eventually sold the network to Dan Colussy in December of 2000 for $25 million, while assuming the entire debt and lawsuits Iridium had left. It was estimated that Motorola had spent about $5 billion to create Iridium and lawsuits were just recently concluded.
Colussy almost immediately secured a $252 million service contract with the Department of Defense, which allowed him to operate Iridium and think about the future (read the background story here.) While Iridium never had more than 15,000 users under Motorola, the company today has more than 305,000 subscribers recently reported quarterly revenues of almost $82 million. Now, Colussy is reaping the fruit of his efforts.
GHL Acquisition said it would acquire the company in a deal valued at $591 million. Iridium shareholders will get $77 million in cash, and 36 million shares in the new company called Iridium Communications. The remaining cash, about $324 million, will be held in trust and used to pay off Iridium’s debt of about $131 million. Greenhill said it will invest $23 million in Iridium convertible debt prior to completion of the transaction, for which it will receive approximately 2.3 million common shares. GH: shareholder will hold about 55% of Iridium’s shares after the acquisition, while the original investor group around Dan Colussy will remain the company’s largest (aggregate) shareholder with 42%.
Following the acquisition, GHL Acquisition will have approximately 73.9 million shares outstanding and 46.1 million warrants outstanding. The companies said that the new Iridium will pursue an initial public offering on NASDAQ.