Inmarsat buyout faces scrutiny on national security grounds

JEREMY WRIGHT, the Culture Secretary, has been asked to weigh in on the £2.6bn bid by private equity firms for satellite communications business Inmarsat.

The Competition and Markets Authority said yesterday that it had flagged the acquisition by Connect Bidco, a consortium including Warburg Pincus and Apax partners, to the Government, as the regulator thought the deal could have public interest concerns.

Under the 2002 Enterprise Act, the CMA has a duty to raise deals with the secretary of state that may affect national security.

The CMA is also considering whether the acquisition could result in “a substantial lessening of competition within any market or markets in the United Kingdom for goods or services”.

The watchdog is inviting comments on the deal from any interested parties before it decides to launch a full competition investigation. That decision will be made Sept 10.

Inmarsat is a leading provider of satellite communications but is facing increased competition from new entrants such as ventures backed by Elon Musk and Sir Richard Branson.

The London-based company has developed high-speed internet services that can be used by passengers on commercial aircraft – a product it hopes will set it apart from rivals and become the dominant player in the market.

Connect, which also includes Canada Pension Plan Investment Board and Ontario Teachers’ Pension Plan Board, is hoping to take Inmarsat private with a deal that was pitched in the spring at a 46pc premium to the FTSE 250 company’s share price.

In May the proposal won the backing of 78pc of Inmarsat’s shareholders, and the acquisition is now seeking regulatory clearances both in the UK and elsewhere with the aim of closing the deal by the end of the year.

It is thought that to get the acquisition approved, Connect is offering long-term undertakings such as keeping Inmarsat’s operations in the UK and investment to maintain the company’s place as a leading force in satellite communications technology.

While the CMA’S announcement is required under law, Connect is understood to have been pushing ahead with work to gain clearance for the deal.

A spokesman for the consortium said: “We have been proactively engaging with government. We made a voluntary submission so that the CMA would look at this transaction.”

Inmarsat declined to comment.