Satellite communications company Globalstar is merging with metro fiber provider FiberLight. The deal will be worth roughly $1.65 billion. Investment firm Thermo Acquisitions, which controls both, pulled all the levers to make the deal happen.
Jay Monroe controls Thermo and is the CEO of Globalstar. The merger is seen to be Thermo’s attempt to stabilize the business of Globalstar, which last recorded an annual profit in 2015. Globalstar has increased its revenue, but it’s also spending more.
As Thermo explained, “the merger is expected to create a fundamentally stronger company with significantly reduced leverage and diversified holdings serving the global telecommunications industry.” Monroe will personally end up with a significantly higher ownership stake.
Thermo gained a controlling interest in Globalstar in 2004 while it was helping the satcom provider out of bankruptcy. Thermo had previously bought interest in a fiber company called Xspedius; in 2005, Xspedius spun out FiberLight, and Thermo bought FiberLight. Xspedius, meanwhile, was bought by TW Telecom, which later merged with Level 3, which was recently purchased by CenturyLink.
That series of deals left behind a web of relationships that persists. Globalstar has used Level 3 as a supplier, recently for MPLS services, and Thermo is using CenturyLink stock to finance the merger of Globalstar and FiberLight.
The Globalstar-FiberLight merger will precipitate a reorganization of Thermo’s businesses. Thermo management will set up as a holding company. It will have four major holdings: Globalstar’s satcom operations will be one. Globalstar SpectrumCo, which consists of Globalstar’s operations associated with its terrestrial spectrum licenses, will stand separate. FiberLight and Thermo’s investment operations will be the other two.
Thermo has bought and sold FiberLight assets as business necessitated. That might provide context for Thermo setting aside Globalstar’s terrestrial spectrum operation as a separate operating unit.
The financing details make the deal seem byzantine, but the basic shape of it is predicated on Globalstar being public while all the other parts are private. The deal involves FiberLight, 15.5 million shares of common stock of CenturyLink, $100 million of cash and other investments, and assets of $25 million, all in exchange for Globalstar common stock valued at approximately $1.65 billion.
Of course, everything remains in the family. For example, Thermo Investments will hold the 15.5 million shares in CenturyLink, which have a current value of $275 million and expected annual dividends of $33.5 million. Thermo Investments also will manage approximately $100 million in cash for future investments.
In a statement, Monroe said of the merger, “The combined entity is uniquely positioned to meet a broad range of customer requirements, from low latency and high capacity networks, to consistent connectivity across large geographical areas. Long-term shareholders should benefit significantly from the combined entity’s strong balance sheet and recurring revenue from the portfolio of satellites, spectrum, fiber infrastructure and other related assets.”