LONGMONT - DigitalGlobe Inc., a Longmont-based provider of high-resolution satellite imagery, announced Monday its board of directors has reached a definitive merger agreement with competitor GeoEye Inc. in a stock and cash transaction valued at approximately $900 million.
The deal gives DigitalGlobe leadership of the new company and ends merger talks that began in February when GeoEye attempted to acquire DigitalGlobe in an unsolicited hostile takeover.
The combined company will retain the DigitalGlobe name and New York Stock Exchange symbol DGI, and be headquartered in Longmont, according to an early-morning press release from the companies. GeoEye is based in Herndon, Virginia. Jeffery Tarr, DigitalGlobe president and chief executive, will retain those roles in the new company.
DigitalGlobe will have six of the 10 directors of the combined company's board of directors. Gen. Howell M. Estes III, chairman of the board of DigitalGlobe, will serve as chairman.
The transaction is expected to be completed in the fourth quarter of 2012 or first quarter of 2013 and is subject to regulatory approvals.
Upon the transaction's completion, DigitalGlobe shareholders will own approximately 64 percent of the company, and GeoEye (Nasdaq: GEOY) shareholders will own 36 percent.
"The combination of DigitalGlobe and GeoEye creates a global leader in earth imagery and geospatial analysis," Tarr said in the release. "Together we will create a more efficient, more diversified and more capable company, better positioned to thrive in a time of unprecedented pressure on our nation's defense budget. Once the merger is complete, we will emerge as an industry-leading, geospatial information business that does even more to help our customers better understand our changing planet. In so doing, we will further enable our customers to save time, save money and save lives."
The company "conservatively" projects 2012 revenue of more than $600 million, even after reduced federal funding of the EnhancedView satellite program is considered, according to the release.
The new DigitalGlobe is expected to have five Earth-observation satellites and a broad suite of high-value geospatial production and analytic services, according to the release. The combined company also will have two satellites under construction, WorldView-3 and GeoEye-2.
DigitalGlobe and GeoEye began merger talks in February, when GeoEye made an unsolicited takeover offer. DigitalGlobe responded by offering to acquire GeoEye in a deal that would allow it to retain control of the new company.
GeoEye made its bid public on May 4, and two days later DigitalGlobe's board of directors announced it had rejected the bid. Digital Globe also harshly criticized GeoEye for making its acquisition attempt public.
"We believe GeoEye made its hostile bid in desperation due to highly publicized concerns about potential government decisions that may jeopardize their portion of the EnhancedView program," Tarr said in the press release announcing the rejection of the bid.
Despite the criticism, DigitalGlobe said it remained interested in acquiring GeoEye, It offered terms that would give DigitalGlobe shareholders a 60 percent stake in the company, give it a majority of seats on the board of directors and give its chairman and CEO control of the company.
The release did not mention the past takeover attempts. Instead, it emphasized the new DigitalGlobe's increased scale, the diversification of its customer base, "synergy" between the companies and potential savings for the U.S. government, a major client.
The potential loss of government contracts was a big deal for both companies, and the combination is expected to aid in securing federal dollars.
Shareholders in the combined company "should reasonably expect a more stable and predictable funding environment," the release said.
According to the release, GeoEye shareowners will have the right to elect either 1.137 shares of DigitalGlobe common stock and $4.10 per share in cash, 100 percent of the consideration in cash ($20.27) or 100 percent of the consideration in stock (1.425 shares of DigitalGlobe common stock) for each share of GeoEye stock they own, with the amount of cash and stock subject to proration depending upon the elections of GeoEye shareholders, such that the aggregate consideration mix reflects the ratio of 1.137 shares of DigitalGlobe common stock and $4.10 per share in cash.
The transaction delivers a premium of 34 percent to GeoEye's July 20, 2012, closing price of $15.17 per share, the release said.
Both companies' major shareholders support the deal, according to the release.
DigitalGlobe's largest shareowner, Morgan Stanley Principal Investments, Inc., and its chairman and CEO each have agreed to vote in favor of the issuance of DigitalGlobe common stock in the merger, the release said.
GeoEye's largest share owner, Cerberus Capital Management, L.P. and its chairman and CEO each have agreed to vote in favor of the merger. Cerberus intends to continue investing in the company and has rights to acquire up to 19.9 percent of its share, the release said.
DigitalGlobe has secured a $1.2 billion fully committed financing from Morgan Stanley Senior Funding, Inc. and The Bank of Tokyo-Mitsubishi UFJ Ltd. to refinance the combined company's outstanding debt, the release said.