Colorado's DigitalGlobe Fights Takeover Attempt
Longmont-based DigitalGlobe is fighting a takeover attempt by a Virginia-based company. KUNC’s Emily Boyer spoke with Boulder County Business Report Publisher Chris Wood about the battle.
Boyer: Now before we dig into the details of what’s going on. Let’s talk about what kind of business DigitalGlobe and this other Virginia-based company are in.
Wood:Sure, Both DigtalGlobe and GeoEye which is based in Herndon, Virginia operate fleets of satellites that use high-resolution cameras to provide satellite imagery to U.S. government agencies, including those involved in national security. They also provide images used in Google Maps.
Both companies are roughly the same in terms of revenue. DigitalGlobe recorded revenue of $339 million last year, compared with $356 million for GeoEye.
But, based on stock price and the number of shares outstanding, DigitalGlobe is valued at about $746 million, compared with $572 million for GeoEye.
Boyer: So DigitalGlobe is better off financially. But, last week, GeoEye Inc. announced it would be attempting to purchase DigitalGlobe. What are the details of this offer?
Wood: GeoEye offered $17 a share or about $792 million dollars for DigitalGlobe. But, the Longmont-based company rejected that offer two days later, saying that the proposal undervalued the company and is not in the best interests of stockholders.
Company officials have characterized the offer as a hostile takeover attempt and said GeoEye does not recognize what they call DigitalGlobe’s superior financial performance and better capabilities of its satellites.
Boyer: So what’s the significance of the timing of this offer? Why has DigitalGlobe become a target now?
Wood:It turns out that the companies have been in back-and-forth talks since February about one company buying the other. At risk is U.S. government funding for what’s called the EnhancedView program.
That’s a 10-year, $7.3 billion contract through the U.S. National Geospatial-Intelligence Agency that funnels money to both DigitalGlobe and GeoEye, in roughly equal numbers.
Both companies are concerned about potential cuts in that funding, with cuts of as much as 50% possible, but DigitalGlobe believes that GeoEye is in much greater danger of losing significant EnhancedView funding.
Boyer: Why is the government putting so much money into this EnhancedView program? What is it intended to do?
Wood:EnhancedView is the latest government program to bolster the domestic satellite-imagery business, which is facing increasing competition from overseas. Many government agencies use satellites for everything from national-security reconnaissance to weather, and the needs in the national-defense sector have increased dramatically with the war in Afghanistan, the recent war in Iraq and other conflicts.
Boyer: So where do negotiations between Digital Globe and Geo-Eye stand now?
Wood: Well, over the weekend, DigitalGlobe made a counter-offer to buy GeoEye, but it gave a very short deadline for GeoEye to accept, and that deadline has already expired.
In essence, the all-stock deal would have given DigitalGlobe shareholders 60% of the combined company.
Now, DigitalGlobe says it’s suspending all attempts to purchase GeoEye until after funding for EnhancedView is made clear.
Boyer: Chris, thank you. Chris Wood is the publisher of the Boulder County Business Report.