Spacecom working on amends to keep Xinwei deal alive after satellite destroyed

Israeli satellite operator Space Communications said on Sunday it was working on an amended deal to be acquired by Beijing Xinwei Technology Group after a Spacecom communications satellite was destroyed last week. Xinwei last month agreed to buy Spacecom for $285 million, saying the deal was contingent on the successful launch of Spacecom’s Amos-6 satellite - which was due to take place on Saturday.

But an explosion destroyed a Falcon 9 rocket belonging to Elon Musk’s SpaceX as well as Amos-6 during preparations for a routine test firing at Cape Canaveral in Florida last Thursday. Spacecom said the loss would have a significant impact on the company, with its equity expected to decline by $30 million to $123 million. Its shares lost 9 percent on Thursday, with the explosion occurring late in the trading day. They were suspended on Sunday morning and when they resumed trade lost another 34 percent.

Prior to Sunday’s decline, Spacecom had a market value of 806 million shekels. Spacecom “updated the acquirer (Xinwei) about the loss of the satellite and is examining, along with the buyer, the possibility to amend the agreement and adjust to the new situation,” it said on Sunday.

In a conference call, Spacecom’s general counsel Gil Lotan said it was still too early to provide any forecast regarding the prospect of the merger. “We hope to continue fruitful communications with the prospective buyer,” he said. The Amos-6 satellite was going to be used by a number of key clients, including Facebook to expand internet access in Africa.

Bezeq Israel Telecom, Israel’s largest telecoms provider, said its digital satellite TV provider unit YES could be impacted by the loss of Amos-6. It said it had been using the older Amos-2 and Amos-3 satellites and that should a replacement not be found, it may have to remove some channels. Spacecom said it was entitled to a full refund for Amos-6 from Israel Aerospace Industries (IAI), the satellite’s manufacturer, as well as interest of LIBOR plus 4 percent.

It will also receive $50 million in compensation from SpaceX, or it can choose to use SpaceX for a future launch at no extra cost. Spacecom will also get back money it paid to insure the Amos-6 satellite in orbit. It added that once it receives its compensation, it will be able to pay off bondholders $232 million they are owed.

Reuters