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Susan Smith
Susan Smith
Susan Smith has worked as an editor and writer in the technology industry for over 16 years. As an editor she has been responsible for the launch of a number of technology trade publications, both in print and online. Currently, Susan is the Editor of GISCafe and AECCafe, as well as those sites’ … More »

GeoEye announces proposal to acquire DigitalGlobe, DigitalGlobe rejects it

May 7th, 2012 by Susan Smith

On Friday, May 4, GeoEye held an investor webcast announcing that it proposes to acquire DigitalGlobe, Inc., seen by DigitalGlobe as a “public hostile offer.” The combination of these two satellite imaging companies would form the world’s largest fleet of high resolution commercial imagery satellites, according to GeoEye.

Matt O’Connell CEO and President of GeoEye, said that the two companies combined would result in “greater capabilities to meet national security needs, be more cost effective to the U.S. government during a fiscally restrained period, improve value to decision makers, warfighters and shareholders.”

A quick overview of the proposed acquisition: DigitalGlobe shareholders will receive $17.00 per share in total consideration, payable $8.50 per share in cash and $8.50 in GeoEye stock, or 0.3537 shares of GeoEye stock for each share of DigitalGlobe stock. This price represents a 26% premium to DigitalGlobe’s closing share price on May 3, 2012. According to O’Connell, the proposal is structured to provide DigitalGlobe shareholders with the opportunity to participate in the dynamic future growth of the combined company.

Some shareholders might prefer cash, said O’Connell, “we would consider an all cash deal. Our proposal offers shareholders 50% in cash and 50% in stock.  We’ve indicated to directors of DigitalGlobe, we consider an all cash deal, or reducing the cash consideration and increasing the stock portion of the deal.” In addition, affiliates of Cerberus Capital Management, L.P., GeoEye’s largest shareholder, are prepared to contribute substantial capital in support of the proposed transaction.

O’Connell said that GeoEye has been in conversation with DigitalGlobe regarding the potential transaction for several months. DigitalGlobe has considered and rejected their prior proposals, and now we think it’s appropriate to make our proposal publics,” O’Connell said. “because it’s such an important matter for all shareholders to know about and consider.”

Making the case for the proposal, O’Connell continued, “This makes proposal makes strategic sense for the U.S. and international customers, for U.S. taxpayers and  shareholders of both companies. We’re proposing a structured solution that gives our nation’s warfighters and disaster league workers the information they need while at the same time addressing the nation’s budget deficit. The combined company will create a new class of geospatial information and analytic services that ensures continued technology leaderships and accelerated growth in what is already an expanding industry. In turn, the combined company will be  better able to meet the need of U.S. government and international and commercial customers around the world.”

Referring to the “uncertainty in the market created by the U.S. government budget review process for 2013,” O’Connell said that GeoEye is looking at more effective ways to provide the most value during these times to large government clients, who are GeoEye and DigitalGlobe’s primary clients. “A combined company would be larger, more financially sound and better positioned financially without putting our nation’s warfighters or intelligence programs at risk during this fiscally challenging period,” cited O’Connell, linking the proposed acquisition to the stakeholders’ and public’s concerns about national security.

75% of the foundation layer of geointelligence is built on geospatial imagery. Commercial satellite imagery directly supports military operations and the nation’s intelligence interests. The foundation layer is the basis for other geospatial products, for mission planning and rehearsal, command and control, advanced navigation, and targeting – which are all predicated on having geospatial information at their fingertips for combat and command.

With the acquisition of DigitalGlobe, “We can fly one less satellite in the constellation, and still meet our customer needs, thus requiring far less capitalist expenditures,” said O’Connell. “We successfully acquired Space Imaging and SPADAC, we continue to execute well on our business, we believe our current company will deliver value for both shareholders.”

The combined company promises to “bring efficiencies to the National Geospatial-Intelligence Agency (NGA)’s  EnhancedView program, in time this will bring the U.S. government  increased efficiency only possible global collection, dissemination, production and analytical capabilities.” O’Connell reiterated how the acquisition would enable the two companies to deliver better service to meet national security needs and support warfighters, plus create more high technology jobs in the U.S. –making it look like a proposal DigitalGlobe shareholders may not be able to refuse.

However, over the weekend, DigitalGlobe board members rejected this unsolicited proposal unanimously. From the press release: “Following GeoEye’s public hostile offer last Friday, DigitalGlobe again made the same proposal for the Company to acquire GeoEye, conditioned on reaching agreement over the weekend. Given GeoEye’s rejection of that proposal, DigitalGlobe terminated discussions and will await the government reaching its budget decision regarding EnhancedView. When the government reaches its decision, DigitalGlobe will consider whether to make a proposal to acquire GeoEye.”

GeoEye Webcast

DigitalGlobe Rejects Unsolicited Acquisition Proposal by GeoEye
Proposal Substantially Undervalues Company and Future Prospects LONGMONT, CO, May 06, 2012 (MARKETWIRE via COMTEX) –DigitalGlobe, Inc. (NYSE: DGI) (“DigitalGlobe” or the “Company”), a leading global provider of high-resolution earth imagery solutions, today commented on the unsolicited proposal announced by GeoEye, Inc. (NASDAQ: GEOY) (“GeoEye”) to acquire the Company for $17.00 per share in a combination of cash and stock.Consistent with its fiduciary duties and in consultation with its independent financial and legal advisors, the DigitalGlobe Board of Directors reviewed GeoEye’s unsolicited acquisition proposal and unanimously determined that it substantially undervalues the Company in relation to DigitalGlobe’s standalone business and financial prospects, and is not in the best interests of the Company’s stockholders. In addition, the Board determined 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.DigitalGlobe noted that GeoEye made previous private unsolicited proposals, beginning on February 7, 2012, which the Company believes were motivated by GeoEye’s concerns with the disproportionate risks of government budgets cuts affecting its business. DigitalGlobe rejected those proposals, but was willing to discuss DigitalGlobe acquiring GeoEye, and proposed a transaction under which DigitalGlobe’s stockholders would own approximately 60% and GeoEye stockholders would own approximately 40% of the combined company, with DigitalGlobe’s Chairman and Chief Executive Officer continuing in their respective leadership roles. DigitalGlobe terminated those discussions because the Company believed that the U.S. Government process would be favorable to DigitalGlobe, and that protracted discussions would be disruptive to the U.S. government in its decision-making process as well as create needless distraction to ongoing mission performance.

Following GeoEye’s public hostile offer last Friday, DigitalGlobe again made the same proposal for the Company to acquire GeoEye, conditioned on reaching agreement over the weekend. Given GeoEye’s rejection of that proposal, DigitalGlobe terminated discussions and will await the government reaching its budget decision regarding EnhancedView. When the government reaches its decision, DigitalGlobe will consider whether to make a proposal to acquire GeoEye.

“DigitalGlobe has consistently demonstrated superior operating performance compared to GeoEye, including the stronger relative performance on the EnhancedView program,” said Jeffrey R. Tarr, President and Chief Executive Officer of DigitalGlobe. “DigitalGlobe is the only provider in the industry with a constellation of three healthy on-orbit high resolution satellites, which allows us to deliver vastly more imagery to NGA than GeoEye, both in total and per-taxpayer dollar, generating significant value for the government and taxpayers. We are enthusiastic about our prospects and the opportunities before us, and our ability to successfully execute on our strategic plan to create value for our customers and shareowners.”

Mr. Tarr continued, “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. 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.”

The full text of the letter sent today to Matthew M. O’Connell, Chief Executive 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

Dear Matt:

We are writing in response to GeoEye’s unsolicited conditional “public offer” to acquire DigitalGlobe made in your letter dated May 4, 2012. Our board of directors has met, has carefully considered your proposal and has concluded that GeoEye’s proposal is not in the best interests of DigitalGlobe and its shareholders. Accordingly, DigitalGlobe rejects your offer. Given the abruptness of your “public offer” and our past discussions, we believe you made your hostile bid in desperation due to well-publicized concerns about potential government decisions that may jeopardize your portion of the EnhancedView program.

We believe you initiated discussions with us with your unsolicited highly conditional private offer on February 7, 2012 because you were concerned about a disproportionate risk of budget cuts affecting GeoEye. We believe you have mischaracterized subsequent discussions in your May 4 letter as well as during your Friday investor call. In fact, we believe your public description of such discussions in your May 4 letter is materially misleading and incomplete.

Moreover, before we terminated discussions of a potential combination to await the government’s funding decision, the proposed transaction we were discussing contemplated that DigitalGlobe would designate a majority of the Board and that DigitalGlobe’s shareholders would own a substantial majority of the surviving company. Your May 4 letter fails to mention that we proposed to acquire GeoEye in an all-stock transaction on March 2, 2012 and reaffirmed the same offer on April 13, 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 and customers. Furthermore, we believe our proposed structure more accurately 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
    requirements; and
--  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 customers from our proposal to acquire GeoEye, you rejected our offer both in March and again in April. At that point, recognizing that the federal government was finalizing its budget process, we felt that we should terminate discussions and withdraw our offer.

We expected the budget process outcome would be favorable to DigitalGlobe and its shareholders and believed that protracted discussions between our companies at that time would be disruptive to the U.S. government in its decision-making process as well as create needless distraction to ongoing mission performance.

Therefore, we were surprised by your most recent unsolicited “public offer” given GeoEye’s continued government funding uncertainty. You even acknowledged in your Form 10-Q filing on May 4, 2012 that “management foresees continued uncertainty” regarding funding of your cost share payments beyond the amount to which the NGA is currently obligated. Based on your cost share disclosure, May 4, 2012 earnings call and unsolicited bid, we are concerned about your overall EnhancedView program funding.

In response to your hostile “public offer,” on May 4, 2012, in our May 5, 2012 letter to you we again reiterated our interest in an acquisition of GeoEye on the terms substantially similar to those we previously offered to you. Unfortunately, in discussions between counsel on May 5, 2012, you again rejected our proposal. We continue to believe there are merits to a potential acquisition of GeoEye, but at this time, we also believe that it is in the best interests of DigitalGlobe’s principal constituencies, including our shareholders and all of our customers, to await the conclusion of the government budget decision process and to gain clarity with respect to EnhancedView funding. When the government reaches its decision, DigitalGlobe will consider whether to make a proposal to acquire GeoEye.


/s/ Jeffrey R. Tarr                    /s/ Gen. Howell M. Estes III

Jeffrey R. Tarr                        Gen. Howell M. Estes III (USAF, Ret.)
President and Chief Executive Officer  Chairman of the Board
DigitalGlobe, Inc.                     DigitalGlobe, Inc.

Skadden, Arps, Slate, Meagher & Flom LLP is serving as DigitalGlobe’s legal counsel, and Morgan Stanley and Barclays are serving as DigitalGlobe’s financial advisors.

About DigitalGlobe DigitalGlobe is a leading global provider of commercial high-resolution earth imagery products and services. Sourced from our own advanced satellite constellation, our imagery solutions support a wide variety of uses within defense and intelligence, civil agencies, mapping and analysis, environmental monitoring, oil and gas exploration, infrastructure management, Internet portals and navigation technology. With our collection sources and comprehensive ImageLibrary (containing more than two billion square kilometers of earth imagery and imagery products) we offer a range of on- and off-line products and services designed to enable customers to easily access and integrate our imagery into their business operations and applications. For more information, visit

Safe Harbor Statement Certain statements contained herein and other of our reports, filings, and public announcements may contain or incorporate forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements 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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We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on any of these forward-looking statements.

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(303) 684-4210

Joele Frank / Eric Brielmann / Scott Bisang
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(212) 355-4449

source: DigitalGlobe

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Categories: DigitalGlobe, GeoEYE, remote sensing, satellite imagery

One Response to “GeoEye announces proposal to acquire DigitalGlobe, DigitalGlobe rejects it”

  1. Tim Neidhardt says:

    This takeover attempt by GeoEye reminds me of the 2008 “merger” of Sirius and XM, the two major satellite radio giants at the time. In that case, achieving greater scale economies proved successful 3 years later turning the first sizable profit for Sirius XM. Interestingly, the company just as of this month is also fighting a hostile takeover by Liberty Media. I see many parallels to the DigitalGlobe and GeoEye battle in the process. In teh case of Sirius and XM, however, a major problem resulted in teh fundamentally different and largely incompatible technology employed in space and on the ground necessitating huge capital investments (technology updates) in order to achieve any synergies at all. Does DigitalGlobe face a similar challenge with GeoEye?

    BTW, me and a few business technology specialists have been following GIS Cafe for a while. In fact, we recently created our own GIS blog focusing on GIS business applications. Feel free to view it under

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