Digital Energy Journal- RigNet to acquire Inmarsat's Energy Broadband Business

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RigNet to acquire Inmarsat's Energy Broadband Business

Thursday, August 8, 2013

RigNet, Inc. announced a strategic deal with Inmarsat plc, involving the sale of Inmarsat''s Energy Broadband business to RigNet and the appointment of RigNet to become a key distribution partner to deliver Inmarsat''s Global Xpress (''GX'') and L-band services to the energy sector worldwide.

RigNet has reached a definitive agreement to acquire Inmarsat''s Energy Broadband business for $25.0 million in cash, adding to RigNet''s technology solutions, customer base and geographic footprint. Under the terms of the deal, Inmarsat will carve out and sell to RigNet all of its energy broadband assets, which include: microwave and WiMAX networks in the U.S. Gulf of Mexico serving drillers, producers and energy vessel owners; VSAT interests in Russia, the United Kingdom, U.S. and Canada; an M2M SCADA VSAT network in the continental U.S. serving the pipeline industry; a telecommunications systems integration business operating worldwide; and a global L-band MSS retail energy business. The energy carve-out includes assets, employees, contracts and working capital.

In addition, RigNet has agreed, simultaneous with the closing of the acquisition, to become a key distributor of Inmarsat''s GX satellite communications network services, which will enable RigNet to offer the next-generation satellite services to existing and new customers in the energy, energy maritime and natural resources industries. RigNet has agreed, under certain conditions, to a significant purchase of capacity from the high-throughput GX network during the four years after it becomes operational in 2015. RigNet expects to utilize GX and L-band services across its own business as well as that of the acquired Energy Broadband business.

The business being acquired had revenues of $81.0 million in 2012. The company expects the acquired business to achieve, on a run-rate basis within the first year of closing, an EBITDA contribution margin of 8-10%. As RigNet integrates the operations, it anticipates that it will incur $5-6 million of integration expenses through 2014. Based upon past history, annual capital expenditures for success-based opportunities and maintenance has averaged $5-6 million. RigNet expects that it will make additional capital investments of $5 million in 2014 to continue the network upgrade projects in the acquired business that are currently underway. RigNet expects to finance the transaction with a new credit facility and existing cash.

Both companies have approved the transaction, which is expected to close during or before the first quarter of 2014 after customary conditions have been met and regulatory approvals obtained. Deutsche Bank acted as RigNet''s exclusive financial advisor and Norton Rose Fulbright acted as RigNet''s lead legal advisor on the transaction.

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