Gogo Inc. (GOGO) - Get Report shares spiked Tuesday after the provider of in-flight wireless internet said it was selling its commercial aviation business to communications service provider Intelsat for $400 million.
At last check Gogo shares jumped 26% to $6.48.
The deal is expected to close by the end of first-quarter 2021.
"Following a competitive strategic review process, we're confident this transaction unlocks the full value of the commercial aviation business for shareholders," Gogo President and Chief Executive Oakleigh Thorne said in a statement.
"Combining CA, the leading in-flight-connectivity provider, with Intelsat, the world's largest global satellite operator, will create the leading vertically integrated [in-flight connectivity] business in the world."
Gogo says it will remain a public company and will use the proceeds from the transaction to improve its net debt position and to invest in growth opportunities like Gogo 5G.
Gogo says that will give it greater financial flexibility, including lower borrowing costs over time. The new company will be better positioned to scale its business-aviation segment, which it says is "well-positioned in an attractive and underpenetrated market."
"This transaction creates a stronger and more focused Gogo, with the singular strategic imperative of serving the business aviation market with the best inflight connectivity and entertainment products in the world," Thorne said.
As part of the deal, Gogo will enter into a 10-year network services agreement with Intelsat.
That accord will give Intelsat exclusive access to Gogo ATG services for the commercial aviation market in North America, subject to revenue guarantees of $177.5 million.