Loral To Acquire Orion For $490 Million In Stock

Satellite maker Loral Space & Communications said yesterday it had agreed to buy Orion Network Systems Inc. -- which has a satellite system set to provide communications services to 85 percent of the world's population -- in a stock deal valued at about $490 million.

The boards of directors of both Loral and Orion have approved the transaction, the companies said, which would add another offering to New York-based Loral's current and planned basket of satellite services and expand its reach beyond US borders.

Orion, based in Rockville, Md., operates one of the first privately owned international satellite communications systems.

 

"We believe that, with Loral's diversified space assets and significant resources, the combination will enhance Orion's ability to exploit its global business opportunities and permit Orion's shareholders to realise increased value." Orion Chairman Gustave Hauser said in a statement.

When the deal goes through, expected in the first quarter of 1998, each outstanding share of Orion stock will be converted into $17.50 worth of Loral common stock, assuming the "determination price" of Loral common stock then is between $16 305 and $24 458.

If the determination price is trading at or outside either end of this range, each Orion share would be converted into a fixed number of Loral shares obtained by dividing $17.50 by the high or low end of the range, as appropriate, the company said.

On Tuesday, Loral stock closed up 19 cents at $22.44 in consolidated trading on the New York Stock Exchange, while Orion stock closed down 6 cents at $16.875 on Nasdaq. "Through its acquisition of Orion, Loral captures a valuable and unique set of space-based assets and resources," Loral Chairman Bernard Schwartz said in a statement. "Importantly, in line with our established long-term strategy, Orion expands our satellite services business into new markets and beyond our domestic borders. "Orion complements and extends our current resources in Skynet, Globalstar and CyberStar, contributing a key networking capability positioned to serve the fast-growing, multibillion-dollar corporate data and Internet markets."

Skynet provides satellite services to broadcasting, news media and educational customers. Globalstar, in which Loral owns a 38 percent equity stake, is one of several planned global satellite telephone services and is set to go into service in late 1998.

CyberStar is a satellite-based system that will offer a variety of low-cost, high-speed data and telecommunications services around the world. Orion serves 260 multinational businesses and Internet service providers in 47 countries. It owns and operates the Orion 1 satellite, placed in service in January 1995, covering the European, trans-Atlantic and US markets, and has two additional satellites under construction.(Reuter)

Loral said Orion's transponder capacity will increase substantially with the launching of Orion 3, scheduled for service in January 1999, covering the Asia-Pacific region, and Orion 2, which will serve the Americas and Europe beginning in June 1999.

The three-satellite constellation will be capable of providing services to 85 percent of the world's population by 1999, the company said. "We expect Orion's revenues and earnings to increase dramatically as Orion 2 and Orion 3 are placed into service given the increased demand worldwide for data networking and the explosive growth of the Internet, Orion's chief business drivers," Schwartz said.

The deal is subject to approval under federal antitrust laws and by the Federal Communications Commission and Orion shareholders.