DigitalGlobe Rejects Unsolicited Acquisition Proposal by GeoEye
Proposal Substantially Undervalues Company and Future Prospects
LONGMONT, CO, May 06, 2012 (Menafn - MARKETWIRE via COMTEX) --DigitalGlobe, Inc. DGI ("DigitalGlobe" or the "Company"), aleading global provider of high-resolution earth imagery solutions,today commented on the unsolicited proposal announced by GeoEye, Inc.GEOY ("GeoEye") to acquire the Company for 17.00 per sharein a combination of cash and stock.
Consistent with its fiduciary duties and in consultation with itsindependent financial and legal advisors, the DigitalGlobe Board ofDirectors reviewed GeoEye's unsolicited acquisition proposal andunanimously determined that it substantially undervalues the Companyin relation to DigitalGlobe's standalone business and financialprospects, and is not in the best interests of the Company'sstockholders. In addition, the Board determined that GeoEye'sproposal does not adequately recognize DigitalGlobe's superior trackrecord of financial and operating performance as well as itsconstellation's greater capabilities.
DigitalGlobe noted that GeoEye made previous private unsolicitedproposals, beginning on February 7, 2012, which the Company believeswere motivated by GeoEye's concerns with the disproportionate risksof government budgets cuts affecting its business. DigitalGloberejected those proposals, but was willing to discuss DigitalGlobeacquiring GeoEye, and proposed a transaction under whichDigitalGlobe's stockholders would own approximately 60% and GeoEyestockholders would own approximately 40% of the combined company,with DigitalGlobe's Chairman and Chief Executive Officer continuingin their respective leadership roles. DigitalGlobe terminated thosediscussions because the Company believed that the U.S. Governmentprocess would be favorable to DigitalGlobe, and that protracteddiscussions would be disruptive to the U.S. government in itsdecision-making process as well as create needless distraction toongoing mission performance.
Following GeoEye's public hostile offer last Friday, DigitalGlobeagain made the same proposal for the Company to acquire GeoEye,conditioned on reaching agreement over the weekend. Given GeoEye'srejection of that proposal, DigitalGlobe terminated discussions andwill await the government reaching its budget decision regardingEnhancedView. When the government reaches its decision, DigitalGlobewill consider whether to make a proposal to acquire GeoEye.
"DigitalGlobe has consistently demonstrated superior operatingperformance compared to GeoEye, including the stronger relativeperformance on the EnhancedView program," said Jeffrey R. Tarr,President and Chief Executive Officer of DigitalGlobe. "DigitalGlobeis the only provider in the industry with a constellation of threehealthy on-orbit high resolution satellites, which allows us todeliver vastly more imagery to NGA than GeoEye, both in total andper-taxpayer dollar, generating significant value for the governmentand taxpayers. We are enthusiastic about our prospects and theopportunities before us, and our ability to successfully execute onour strategic plan to create value for our customers andshareowners."
Mr. Tarr continued, "Given the abruptness of GeoEye's most recentproposal and the companies' past discussions, we believe GeoEye madeits hostile bid in desperation due to highly publicized concernsabout potential government decisions that may jeopardize theirportion of the EnhancedView program. Although we continue to believethere are merits to an acquisition of GeoEye, we believe that it isin the best interests of DigitalGlobe's shareowners and all of ourcustomers to await the conclusion of the government budget decisionprocess and to gain clarity with respect to EnhancedView funding."
The full text of the letter sent today to Matthew M. O'Connell, ChiefExecutive Officer of GeoEye follows:
May 6, 2012
Mr. Matthew M. O'Connell President and Chief Executive Officer
GeoEye, Inc. 2325 Dulles Corner Blvd Herndon, VA 20171
We are writing in response to GeoEye's unsolicited conditional"public offer" to acquire DigitalGlobe made in your letter dated May4, 2012. Our board of directors has met, has carefully consideredyour proposal and has concluded that GeoEye's proposal is not in thebest interests of DigitalGlobe and its shareholders. Accordingly,DigitalGlobe rejects your offer. Given the abruptness of your "publicoffer" and our past discussions, we believe you made your hostile bidin desperation due to well-publicized concerns about potentialgovernment decisions that may jeopardize your portion of theEnhancedView program.
We believe you initiated discussions with us with your unsolicitedhighly conditional private offer on February 7, 2012 because you wereconcerned about a disproportionate risk of budget cuts affectingGeoEye. We believe you have mischaracterized subsequent discussionsin your May 4 letter as well as during your Friday investor call. Infact, we believe your public description of such discussions in yourMay 4 letter is materially misleading and incomplete.
Moreover, before we terminated discussions of a potential combinationto await the government's funding decision, the proposed transactionwe were discussing contemplated that DigitalGlobe would designate amajority of the Board and that DigitalGlobe's shareholders would owna substantial majority of the surviving company. Your May 4 letterfails to mention that we proposed to acquire GeoEye in an all-stocktransaction on March 2, 2012 and reaffirmed the same offer on April13, 2012, whereby:
--DigitalGlobe's shareholders would own 60% and GeoEye's shareholders
would own 40% of the combined company;
--DigitalGlobe would control a majority of the Board; and
--DigitalGlobe's Chairman and CEO would continue in their respective
leadership roles of the combined company.
This structure would maximize value to both sets of shareholders andcustomers. Furthermore, we believe our proposed structure moreaccurately reflects the value of DigitalGlobe and recognizes:
--The strength of DigitalGlobe's constellation of three healthy on-orbit
high resolution satellites;
--DigitalGlobe's differentiated capabilities, which allow us to deliver
vastly more imagery to the National Geospatial Intelligence Agency
("NGA") than GeoEye, both in total and per-taxpayer dollar, generating
significant value for the government and taxpayers;
--DigitalGlobe's superior current collection and delivery capabilities,
which enable it alone to provide substantially all of what NGA is
currently receiving from both companies under EnhancedView at
substantially lower cost;
--The superior performance of DigitalGlobe on the EnhancedView program
as indicated by the repeated, large holdbacks you have incurred
against your Service Level Agreement ("SLA") -- which we believe may
indicate significant shortfalls in performance against NGA's
--DigitalGlobe's dramatically higher organic growth as evidenced by our
1Q 2012 revenue growth rate of 12%, compared to only 3% for GeoEye.
Despite the superior benefits to both of our shareholders and customersfrom our proposal to acquire GeoEye, you rejected our offer both inMarch and again in April. At that point, recognizing that the federalgovernment was finalizing its budget process, we felt that we shouldterminate discussions and withdraw our offer.
We expected the budget process outcome would be favorable toDigitalGlobe and its shareholders and believed that protracteddiscussions between our companies at that time would be disruptive tothe U.S. government in its decision-making process as well as createneedless distraction to ongoing mission performance.
Therefore, we were surprised by your most recent unsolicited "publicoffer" given GeoEye's continued government funding uncertainty. Youeven acknowledged in your Form 10-Q filing on May 4, 2012 that"management foresees continued uncertainty" regarding funding of yourcost share payments beyond the amount to which the NGA is currentlyobligated. Based on your cost share disclosure, May 4, 2012 earningscall and unsolicited bid, we are concerned about your overallEnhancedView program funding.
In response to your hostile "public offer," on May 4, 2012, in ourMay 5, 2012 letter to you we again reiterated our interest in anacquisition of GeoEye on the terms substantially similar to those wepreviously offered to you. Unfortunately, in discussions betweencounsel on May 5, 2012, you again rejected our proposal. We continueto believe there are merits to a potential acquisition of GeoEye, butat this time, we also believe that it is in the best interests ofDigitalGlobe's principal constituencies, including our shareholdersand all of our customers, to await the conclusion of the governmentbudget decision process and to gain clarity with respect toEnhancedView funding. When the government reaches its decision,DigitalGlobe will consider whether to make a proposal to acquireGeoEye.
/s/ Jeffrey R. Tarr/s/ Gen. Howell M. Estes III
Jeffrey R. TarrGen. Howell M. Estes III (USAF, Ret.)
President and Chief Executive OfficerChairman of the Board
DigitalGlobe, Inc.DigitalGlobe, Inc.
Skadden, Arps, Slate, Meagher & Flom LLP is serving as DigitalGlobe'slegal counsel, and Morgan Stanley and Barclays are serving asDigitalGlobe's financial advisors.
About DigitalGlobe DigitalGlobe is a leading global provider ofcommercial high-resolution earth imagery products and services.Sourced from our own advanced satellite constellation, our imagerysolutions support a wide variety of uses within defense andintelligence, civil agencies, mapping and analysis, environmentalmonitoring, oil and gas exploration, infrastructure management,Internet portals and navigation technology. With our collectionsources and comprehensive ImageLibrary (containing more than twobillion square kilometers of earth imagery and imagery products) weoffer a range of on- and off-line products and services designed toenable customers to easily access and integrate our imagery intotheir business operations and applications. For more information,visit www.digitalglobe.com.
Safe Harbor Statement Certain statements contained herein and otherof our reports, filings, and public announcements may contain orincorporate forward-looking statements within the meaning of thePrivate Securities Litigation Reform Act of 1995, as amended.Forward-looking statements relate to future events or our futurefinancial performance. We generally identify forward-lookingstatements by terminology such as "may," "will," "should," "expects,""plans," "anticipates," "could," "intends," "target," "projects,""contemplates," "believes," "estimates," "predicts," "potential" or"continue" or the negative of these terms or other similar words,although not all forward-looking statements contain these words.
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