NEW YORK–(BUSINESS WIRE)–Rubric Capital Management LP, an investment advisor whose funds and accounts beneficially own approximately 2.2% of the outstanding shares of Inmarsat plc (“Inmarsat”), today sent a letter to the Board of Directors of Inmarsat in support of an earlier letter from Oaktree Capital Management, L.P.
The full text of the letter follows:
5 November 2019
Mr. Andrew Sukawaty
99 City Road
London, EC1Y 1AX, UK
Re: Oaktree Letter and Ligado Developments
Dear Mr. Sukawaty:
Rubric Capital Management LP (“Rubric” or “we”) advises investment funds that are together the beneficial owners of 10,377,957 shares (representing approximately 2.2% of shares in issue) in Inmarsat plc (“Inmarsat” or the “Company”). We write regarding the Company’s 25 March 2019 announcement that Inmarsat’s board of directors (the “Board”) has reached an agreement on the terms of a recommended cash offer by Triton Bidco (Guernsey) Limited (the “Bidder”, now having changed its name to Connect Bidco Limited) to acquire the Company at $7.21 per share1 (the “Proposed Transaction”).
We also wish to publicly respond in support of Oaktree Capital Management, L.P.’s (“Oaktree”) 5 November 2019 letter (the “Oaktree Letter”). In summary, we agree with Oaktree’s assessment: there has been a material change with respect to the applications (the “Application”) by Ligado Networks LLC (“Ligado”) for approval by the United States Federal Communications Commission (the “FCC”) to deploy its spectrum capabilities in furtherance of its transition to a 5G network. As a result, there is now a very real possibility of a significant increase in the value of the Company in the near term.
As has been publicly reported by a number of publications, on 24 October 2019 the FCC forwarded a copy of a proposed order (the “Order”) approving Ligado’s Application to the Interdepartment Radio Advisory Committee (“IRAC”), which is chaired by the National Telecommunication and Information Administration (the “NTIA”). Rubric understands that the FCC has unilateral authority to issue the Order approving the Application as recently stated in the August 2019 Annual Report on the Status of Spectrum Repurposing2.
As further noted in the Memorandum of Understanding Between the FCC and the NTIA (the “2003 MOU”)3, there is a minimum 15 business day comment period prior to FCC final action on “proposed actions that could potentially cause interference to government operations … Final action by the FCC, however, does not require approval by the NTIA”4 (emphasis added).
We believe the FCC’s recent move to forward a copy of the Order approving the Application is a significant development: it materially increases the probability that Ligado receives FCC approval of its Application within a pre-defined timeframe with the related additional upside value then resulting from such approval.
Given recent developments, we strongly encourage the Board to maximize the available time that precedes the Long Stop Date5 and to delay the Court Sanction Hearing (the “Sanction Hearing”) currently scheduled for 12 November 2019 in order to evaluate further whether Ligado will ultimately have its Application approved by the FCC, particularly given the potential that we will see public notice from the FCC regarding the Application in the near-term. Furthermore, we note the minimum 15 business day period specified in the 2003 MOU would imply that the FCC could move forward and circulate a final version of the Order for an FCC vote as early as the 20th or 21st of November 20196, which is roughly 1 week AFTER the currently scheduled 12 November 2019 date for the Sanction Hearing.
Lastly, we note that in May 2019 we closed out some of our derivative positions in the Company for the purpose of holding cash securities in order to assist in voting for the Proposed Transaction. This action (done at significant expense for the investment funds we advise) was taken in response to urgent requests by Inmarsat senior management and advisors, who were actively seeking to obtain our support to reach the necessary 75% threshold to move forward with the Proposed Transaction7. At the time we also received a number of verbal assurances from Inmarsat senior management that the Board would thoughtfully consider any subsequent events with respect to Ligado that materially called into question whether the Proposed Transaction was reflective of the Company’s true value.
Given the above, we therefore urge the Board to consider, in light of this material new information regarding Ligado and the potential imminent timing of FCC approval, whether, given the potential additional upside value that will result from the FCC approval, proceeding with the Sanction Hearing on 12th November 2019 is in the best interests of Inmarsat shareholders as a whole.
If the Board declines to engage with this request, Rubric’s current intention is to attend the Sanction Hearing, and to indicate its concerns relating to the Proposed Transaction to the Court.
Rubric Capital Management LP
1 Comprising a cash consideration of $7.09 per share plus the final dividend of $0.12 per share paid on 30 May 2019 to Inmarsat shareholders on the Company’s register as at close of business on 23 April 2019.
2 See pg. 16 re: Ligado: “Next Steps: The FCC will issue a determination on the applicant’s pending modification applications.” https://www.ntia.doc.gov/files/ntia/publications/spectrum_repurposing_report_august_2019.pdf
3 Source: https://www.ntia.gov/files/ntia/publications/fccntiamou_01312003.pdf
4 Id. See pg. 2
5 As noted in the scheme document: https://investors.inmarsat.com/wp-content/uploads/2019/09/1.-Scheme-Document.pdf (which did not include mention of Ligado, except to specify that certain Inmarsat revenue line items in the Company’s unaudited financial results for the year ended 31 December 2018 excluded contribution from Ligado), the Long Stop Date (as therein defined) for the Proposed Transaction is 10 December 2019 “unless the Regulatory Conditions have not been satisfied and/or waived, and Completion has not occurred, in each case by 10 December 2019, in which case it shall be 13 March 2020”.
6 FCC’s December Open meeting is scheduled for 12 December 2019. The FCC releases an agenda of items to be voted upon three weeks in advance.
7 The Proposed Transaction was subsequently approved by Inmarsat shareholders, but only with the affirmative vote of 77.07% of shareholders: https://investors.inmarsat.com/wp-content/uploads/2019/09/Results-of-Court-Meeting-and-General-Meeting-of-Shareholders-10-May-2019.pdf
Jonathan Gasthalter/Sam Fisher
Gasthalter & Co.