NEW YORK (The Deal) -- Highland Capital Management LP late Monday complained that a reported potential sale of satellite communications company Loral Space & Communications (LORL) to a consortium of investors involving two Canadian public pension funds for $80 to $85 a share didn't reflect the "intrinsic value" of the company.
Highland, which owns 9.9% of the common voting stock in the satellite group, cited in a Securities and Exchange Commission filing reports of sale negotiations between Loral and a consortium that includes Ontario Teachers' Pension Fund and Canada's Public Sector Pension Investment Board, or PSP.
The pension funds reportedly are bidding to buy Loral's single biggest asset, Telesat Holdings Inc., a Canadian satellite operator based in Ottawa that provides satellite communications to broadcast, telecom, corporate and government clients. Loral owns a 62.8% economic interest in Telesat. PSP owns a 35% economic interest in Telesat.
Highland's filing comes after a June Reuters report, citing people familiar with the situation, that Loral rejected an offer from the consortium which valued Loral at more than $80 a share and Telesat at roughly $7 billion including debt. Loral did not return calls seeking comment.Highland's co-founder James Dondero noted in his letter, which was attached to the SEC filing, that he was aware from public sources that Loral had been exploring a sale of Loral and or Telesat and that the sale process had progressed to the point of including one buyer, the Canadian pension fund consortium. He added that Loral may be considering a transaction structure where "significant payments" are being made to some Telesat shareholders in exchange for their support of the proposed transaction. However, Dondero argued that public analysts report that Loral could soon be worth much more than $85 a share. "If Loral is able to grow its earnings by a modest six percent in 2014 and Loral uses its substantial free cash flows to pay down debt, public analysts report that Loral will be worth $105 per share by the end of this year," Dondero wrote. "Simply maintaining the status quo at Loral will deliver significantly more value to Loral's stockholders than the proposed $80-85 per Loral share transaction price to be paid by Ontario/PSP based on the public reports. This analysis should not come as a surprise to Loral." (LGF) $7.5 million for allegedly failing to disclose to investors a set of extraordinary corporate transactions in 2010 that put millions of newly issued companY shares in the hands of a management-friendly director that people familiar with the situation say was MHR's Rachesky. Shares of Loral were down from Monday's close of $73.26, trading early Tuesday at $72.91 a share.