Satellites can fly higher in private

NEW YORK (Reuters Breakingviews) – Volatile revenue makes for a volatile share price. When a company’s business model requires lots of up-front investment too, being publicly traded can be a painful experience. That’s one explanation for private equity firms Advent International and British Columbia Investment Management’s purchase of satellite firm Maxar Technologies for $6.4 billion, including debt. The chunky 129% premium suggests they think the company can fly higher off public markets.

The acquisition is priced roughly where the company’s stock was trading about five years ago. A decline in demand for construction of big projects, and the failure of a satellite Maxar built, hit the firm hard, as insurance only partly covered losses and customers shied away. And tight capital made it harder to invest in its growing business of providing satellite imaging. The stock’s valuation, as a multiple of estimated operating income, has halved since 2018, according to Refinitiv.

Maxar plans to launch imaging satellites faster in private than it had when it was public. The new owners might even later spin off the capital-intensive construction business to a defense contractor or industrial conglomerate better equipped to deal with the swings in cash flow. That could raise Advent’s chances of reaching the financial equivalent of escape velocity. (By Robert Cyran)

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