Inmarsat takeover clears final hurdle after hedge funds drop challenge

By Paul Sandle

LONDON (Reuters) - A private equity consortium's $3.4 billion (£2.65 billion) takeover of British satellite company Inmarsat <ISA.L> was approved at a court hearing on Tuesday after hedge fund investors dropped a plan to challenge the value of the deal.

Activists Oaktree, Kite Lake and Rubric Capital wanted the court to block the deal's "scheme of arrangement" because they said the price did not reflect the value of Inmarsat's longstanding agreement with U.S. broadband company Ligado.

Victory for the hedge funds would have sent shockwaves through the M&A sector because scheme of arrangements are usually rubber stamped by courts following shareholder approval.

Inmarsat's buyer - a consortium of UK-based Apax Partners, U.S.-based Warburg Pincus and the Canada Pension Plan Investment Board (CPPIB) - squared up to the hedge funds on Monday when it made its offer final and said it would not extend the Dec. 10 expiration date, in effect closing the window for the challengers to win any concessions.

The hedge funds wanted the judge to block the takeover because they said the price did not reflect the future value of Inmarsat's contract with Ligado, which licenses some of the satellite group's airwaves but has struggled to create a viable network.

"Having considered our position carefully, we now no longer intend to raise objections to the Scheme being sanctioned at the Hearing," the hedge funds said on Tuesday.

Inmarsat's shareholders decisively backed the takeover in May, with nearly 79% of shares voted in favour.

The hedge funds, led by Oaktree with a 2.85% stake, argued that Ligado could be on the cusp of modifying its licence from U.S. regulators, which could potentially trigger payments to Inmarsat.

But the satellite company, which provides communications for aircraft, shipping and governments, said that the prospect and timing of any revenue or other value from its Ligado contract remained uncertain.

Its lawyer Michael Todd said Inmarsat had clearly communicated to shareholders the board's uncertainty about revenue from Ligado and about the prospect of the operator modifying its license in the face of opposition.

He said the company's board of directors had clearly discharged its duty to disclose information to shareholders before they voted on the deal.

Inmarsat said the scheme remained conditional upon the delivery of a copy of the Court Order to the Registrar of Companies, which was expected to take place on Wednesday.

(Editing by Kate Holton, Susan Fenton and Alexandra Hudson)