Newsroom
Stratos Completes Xantic Acquisition Creating World's Leading Remote Communications Company
BETHESDA, MD (February 14, 2006) - Stratos Global Corporation (TSX: SGB), a leading global provider of advanced mobile and fixed-site remote telecommunications solutions, today announced that it has successfully completed its acquisition of Xantic B.V. for a purchase price of approximately US$191 million, subject to post-closing adjustments.
Xantic was the third largest provider of Inmarsat services in 2004, accounting for approximately 19 percent of Inmarsat's mobile satellite telecommunications revenue. With the completion of this transaction, Stratos' market share increases to approximately 44 percent of Inmarsat's mobile satellite telecommunications revenue, nearly twice that of the next largest provider of Inmarsat services.
This transaction also significantly enhances Stratos' geographic presence and global balance by combining its leading position in the Americas with Xantic's strong position in Europe and the Asia-Pacific region; and creates the clear market leader in each of the key vertical markets for mobile satellite services, including the government and military, maritime, leasing and telecom carrier sectors.
"The acquisition of Xantic significantly enhances our geographic and vertical market presence to better serve the critical remote communications needs of our customers, and our expanded scale will drive significant operational synergies and an improved cost structure," said Jim Parm, president and chief executive officer of Stratos. "We welcome Xantic's staff, customers and partners to the Stratos family, and look forward to working with them to integrate our businesses and achieve continued success as we move forward."
Stratos financed the acquisition of Xantic and refinanced its existing debt through the completion of US$270 million of new senior secured credit facilities and the issuance of US$150 million of senior notes. The new senior secured credit facilities consist of a five-year US$25 million revolving operating facility; a five-year Term A facility of up to US$20 million; and a six-year Term B facility of US$225 million. The Term B loan initially bears interest at LIBOR plus 275 basis points and the senior notes have a coupon of 9.875%. The revolving operating and Term A facilities are currently undrawn.
With the completion of the acquisition, in the first quarter of 2006, Stratos will incur non-cash, after tax write-offs of approximately $24.0 million related to the rationalization of its post-acquisition land earth station network and for costs previously deferred in connection with its December 2004 refinancing.
Post-acquisition Cost Synergies
With the acquisition of Xantic, Stratos expects to realize between US$20 and US$25 million in annual operating expense and capital expenditure synergies within 24 months of completing the transaction. The expected synergies consist of between US$5 and US$6 million in lower costs of goods and services from greater volume-based price discounts from Stratos' primary supplier, Inmarsat; between US$7 and US$9 million in lower operating expenses through the consolidation of network and IT infrastructure; between US$4 and US$6 million in lower operating expenses associated with the rationalization of sales and marketing, product development, customer service, accounting and finance, and other back office functions; and, between US$4 and US$5 million in reduced capital expenditures resulting from the rationalization of network and IT infrastructure.
Pro Forma Financial Performance
On a pro forma basis, after giving effect to the acquisition of Xantic, Stratos, when combined with Xantic, would have had revenue of US$552.0 million and Adjusted EBITDA of US$92.7 million for the year ended December 31, 2004; revenue of US$426.0 million and Adjusted EBITDA of US$68.2 million for the nine-month period ended September 30, 2005; and revenue of US$560.2 million and Adjusted EBITDA of US$94.1 million for the 12 months ended September 30, 2005. On a pro forma basis, as of September 30, 2005, Stratos would have had total assets of US$814.8 million.
Adjusted EBITDA is a non-GAAP financial measure, defined as net earnings (loss) before interest expense, income tax expense, depreciation and amortization, equity in earnings of investee, non-controlling interest and other costs (income). For the nine and 12 month periods ended September 30, 2005, Adjusted EBITDA also reflects the exclusion of the estimated US$1.7 million effect of hurricanes Katrina and Rita on our operations in the third quarter of 2005, and removes the impact of certain non-recurring items that positively impacted Xantic's results by US$5.8 million for the first nine months of 2005, including bad debt recoveries and various customer and supplier settlements.
About Stratos
Stratos Global Corporation (www.stratosglobal.com) is a publicly traded company (TSX: SGB) and the leading global provider of a wide range of advanced mobile and fixed-site remote communications solutions for users operating beyond the reach of traditional networks. With its owned-and-operated infrastructure and extensive portfolio of industry-leading satellite and microwave technologies (including Inmarsat, Iridium, Globalstar, MSAT, VSAT, and others), Stratos serves the voice and high-speed data connectivity requirements of a diverse array of markets, including government, military, energy, industrial, maritime, aeronautical, enterprise, media and recreational users throughout the world.
Caution Concerning Forward-Looking Statements
Documents related to this release contain statements and information about potential future circumstances and developments. Such statements and information are qualified by the inherent risks and uncertainties surrounding future expectations generally and may differ materially from Stratos Global Corporation's actual future results. For additional information with respect to these risks and uncertainties, reference should be made to the Corporation's continuous disclosure materials filed with the Canadian Securities Administrators. Stratos Global Corporation disclaims any intention or obligation to update or revise any forward-looking statements or information, whether as a result of new information, future events, or otherwise.
For additional information :
Carla Riggs
Director, Corporate Communications
+1 709 748 4857
carla.riggs@stratosglobal.com