The blockbuster takeover of UK tech giant Inmarsat was thrown into chaos on Tuesday after one of its largest shareholders threatened to scupper the $3.4 billion (£2.6 billion) deal after accusing the board of short-changing investors.
Oaktree, a hard-driving investment firm founded by billionaire Howard Marks, has demanded a delay, arguing the deal needs to be sweetened to give investors cash from a lucrative US mobile phones spectrum contract, said to be worth a whopping $2 billion.
The deal was set to complete next week but the 11th-hour intervention by Oaktree. which owns 2.85% of the firm, heightens uncertainty around the swoop, which has prompted a political and City backlash.
Oaktree argues that the price being paid by bidders Warburg Pincus and Apax ignores huge revenues Inmarsat may be set to gain from its US partner Ligado.
Oaktree believes Ligado is about to be granted US mobile spectrum by regulators that would trigger big payments to Inmarsat under a licensing agreement.
Jefferies analysts estimates the payments could be worth around $2 billion.
In a letter to the board, Oaktree has demanded any cash from the contract to be given to shareholders either through a one-off payout or by restructuring the original deal.
Oaktree hopes regulatory approval could happen within weeks, and wants High Court approval of the takeover delayed from next week to December. It has threatened to go to court to try to stop it if the board doesn’t listen.
Inmarsat is a major London employer with around 1000 people in Old Street and agreed a $7.21-per-share takeover offer by private equity firms Apax and Warburg Pincus in March.
The takeover prompted criticism from figures like Sir Vince Cable, who argued it sold off vital British technology. Ministers demanded binding commitments from Inmarsat to keep jobs in the UK.
Shareholders also staged a rebellion over the price, with a fifth, including Norges, Jupiter and Aberdeen Standard Life, voting against the deal. Oaktree also voted no.
Oaktree blasted the board, led by Andrew Sukawaty, for failing to engage with it. “As you have decided to reject private engagement, we are making a public statement,” said Oaktree’s Steve Tesoriere.
Sources for the bidders said no new information about the Ligado contract had emerged since the deal was approved, adding there was “substantial uncertainty” over it.
Inmarsat said the board was "mindful of its fiduciary duties and continues to monitor any developments" on Ligado but said the timing and prospect of revenue from the licensing agreement "remain uncertain". It added it planned to complete the deal at High Court next week.
Jefferies said: "The issue is that even once Ligado’s application is approved, it may remain unclear for some time on what terms Ligado can monetise the spectrum."