DigitalGlobe Inc. on Sunday, May 6, rejected a $792 million bid from GeoEye Inc., telling shareholders the $17 per share offer undervalued the satellite imaging firm and that it is better positioned to withstand looming government cutbacks than its rival.
Herndon, Va.-based GeoEye went public with its cash and stock offer for DigitalGlobe last week after months of private discussions failed to produce a deal. The suitor in a letter accompanying the bid cited government austerity pressures that could crimp earnings and the emergence of overseas rivals as compelling reasons to join forces.
DigitalGlobe, in rejecting the offer, said its board had determined the bid "substantially undervalues" the company relative to its standalone business prospects. The company also said that GeoEye's proposal "does not adequately recognize DigitalGlobe's superior track record of financial and operating performance as well as its constellation's greater capabilities."
Longmont, Colo.-based DigitalGlobe, whose market cap is about $200 million more than GeoEye's, said that during private discussions that began in February it countered GeoEye's overture with its own all-stock offer. That bid would have left DigitalGlobe's stockholders owning about 60% of the combination and with its management team remaining in charge.
DigitalGlobe said it revived that offer in private on Friday, after GeoEye went public with its bid, but the proposal was spurned.
DigitalGlobe said that it would fare better than GeoEye should government cuts come as expected to EnhancedView, the National Geospatial-Intelligence Agency's satellite image buying program, and said its shareholders would be better served by waiting for the results of government reviews.
"Given the abruptness of GeoEye's most recent proposal and the companies' past discussions, we believe GeoEye made its hostile bid in desperation due to highly publicized concerns about potential government decisions that may jeopardize their portion of the EnhancedView program," company CEO Jeffrey R. Tarr said in a statement.
"Although we continue to believe there are merits to an acquisition of GeoEye, we believe that it is in the best interests of DigitalGlobe's shareowners and all of our customers to await the conclusion of the government budget decision process and to gain clarity with respect to EnhancedView funding."
GeoEye CEO Matt O'Connell in a statement said "we are disappointed that DigitalGlobe's board of directors has rejected our highly attractive proposed acquisition," with the company pledging to consider its options in light of the rejection.
Goldman, Sachs & Co., Convergence Advisors LLC and Latham & Watkins LLP are advising GeoEye. DigitalGlobe is taking financial advice from Morgan Stanley and Barclays plc and legal counsel from Marie Gibson and Nancy Lieberman of Skadden, Arps, Slate, Meagher & Flom LLP.