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Avanti kicks off the silly Season - still a sell
By Lucian Miers | Monday 15 August 2016
Disclosure: The author has a short position in one or more of the shares mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
They don’t call this the silly season for nothing. Shortly after Inmarsat (ISAT) announced on August 1st that it was not interested in Avanti (AVN), a story appeared in the FT saying that it had in fact been willing to pay “at least” 140p per share (subject to due diligence) right up until the end of July, around five times the price at the time.
Well someone here is being very silly. Either Avanti for turning down such a crazy offer, or Inmarsat for making such a crazy offer or Paul Murphy at the FT for reporting such a crazy offer. Or a third party for making an even crazier offer.
140p would represent paying around $270 million for Avanti’s equity meaning an enterprise value of around $860 million for Inmarsat to pay for starters, with further funding needs on top of that of at least $50 million.
Last time I looked, Inmarsat had net debt of $1.9 billion against equity of $1.1 billion. To find $860 million to buy a loss making company with tangible assets of less than one quarter of that sum would not be too straight forward even in today’s easy money environment.
If it had pulled it off it would be up there with Slater and Gordon’s ill-fated bid for Quindell as the kind of deal that ends destroying the bidder. It won't. There will be no bid and that is why I remain short.
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