Providence Equity to buy stake in satellite provider

Carlyle Group and Providence-based Providence Equity
Partners each will pay $953 million for 27 percent stakes in
satellite operator PanAmSat Corp. after losing to Kohlberg,
Kravis, Roberts & Co. in bidding for control of the company.

KKR agreed in April to buy Wilton, Conn.-based
PanAmSat from DirecTV Group Inc. and other investors for $23.50 a
share, or $3.53 billion. KKR, the world’s largest buyout firm,
has since agreed to keep a 44 percent stake and let Carlyle and
PanAmSat invest, PanAmSat said in filings with the U.S.
Securities and Exchange Commission.

Buyout firms including Carlyle, Providence Equity and KKR finance
acquisitions with a combination of cash and debt. They are
currently under pressure to complete purchases before interest
rates rise and make borrowing more expensive, analysts said.
PanAmSat is attractive to the buyout firms because its reliable
cash flow can help them quickly pay off debt.

PanAmSat “has a good predictable revenue stream,” said
Thomas Watts, an analyst with SG Cowen & Co. in New York. “Over
the next few years, the company should generate substantial free
cash flow.”

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Providence spokesman Andrew Cole and Carlyle spokesman
Christopher Ullman confirmed the investments, which total about
$1.9 billion. KKR spokeswoman Ruth Pachman declined to comment.
PanAmSat spokeswoman Kathryn Lancioni didn’t immediately return a
phone call seeking comment.

PanAmSat stock has risen 7.8
percent this year.

PanAmSat is the largest U.S. commercial-satellite operator,
and its biggest customers are media companies. Television
networks including Time Warner Inc.’s HBO, Walt Disney Co.’s ESPN
and News Corp.’s Fox use PanAmSat’s satellites to transmit
programming to local cable systems and broadcast stations.

Carlyle, based in Washington, and Providence Equity will each pay $23.50 a share for their
respective stakes in PanAmSat, SEC filings say. The company had
150.3 million shares outstanding last month. Carlyle and
Providence were part of an investor group that failed to outbid
KKR for control of PanAmSat earlier this year, the filings state.

PanAmSat generated $58.1 million in free cash flow in the
first quarter, up 26 percent from a year earlier. Free cash flow
is profit before depreciation, amortization and some other items
and after capital spending. Free cash flow is considered an
important measure of a company’s ability to pay debt.

Bloomberg News

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