Looking to raise new capital for its ambitious multibillion-dollar plan to launch hundreds of low-Earth orbit satellites, Ottawa-based Telesat has confirmed it’s going public on the Nasdaq Stock Exchange.
Telesat said Tuesday it's signed an agreement with Loral Space & Communications and the Public Sector Pension Investment Board to combine Loral and Telesat into a new publicly traded company.
Loral, which also announced a special dividend of $1.50 per share, holds a 62.7 per cent economic interest in Telesat Canada. Under the plan, Loral shareholders, together with PSP Investments and certain current and former management shareholders of Telesat, will own the new company in about the same proportion as their current, indirect ownership in Telesat.
The Public Sector Pension Investment Board and Loral, which currently trades on the Nasdaq, are Telesat’s main shareholders. The transaction will see Telesat Canada and Loral become subsidiaries of a new company called Telesat Corporation.
The satellite equipment provider said Tuesday it expects the deal to close in the second or third quarter of 2021. Telesat said it is also considering a listing on a Canadian stock exchange.
Firm to remain 'Canadian-controlled'
The new firm will remain headquartered in Ottawa, the company said in a news release. Dan Goldberg, Telesat’s CEO since 2006, will continue in the position, and the company said voting and governance provisions will “ensure that the company is and remains Canadian-controlled.”
Although the deal is not an initial public offering in the strictest sense – Telesat is not selling its shares for cash, but rather exchanging them for shares in other companies – the company said Tuesday "it creates the structure" that will enable it to raise funds in the future via public trading.
In an interview with OBJ on Tuesday afternoon, Goldberg said the transaction will help the firm fortify its financial warchest as it ramps up plans to build 300 new satellites by 2023. The new satellites are designed to provide high-speed internet service to customers in remote areas who can’t be reliably served by existing fibre-optic networks.
“This will open up a new avenue for us to fund our growth ambitions,” Goldberg said.
The CEO said becoming a publicly traded entity will also give Telesat greater “strategic flexibility” to make acquisitions with a combination of equity and cash as it jockeys for position in the ultra-competitive satellite space.
Tech titans such as Amazon and Elon Musk’s SpaceX are also launching low-Earth orbit satellites – LEO for short – in a bid to deliver broadband service to far-flung parts of the planet. Hovering just 1,000 kilometres above the Earth – as opposed to traditional geostationary satellites that orbit roughly 36,000 kilometres above – LEO satellites allow for faster internet speeds by reducing the amount of time it takes to transmit communications signals.
On track for 2022 testing
While Telesat is smaller than its rivals, it has landed tens of millions of dollars in R&D funding and a major contract from the federal government in its bid to get the LEO constellation off the ground. The 10-year deal that would see the feds use Telesat’s satellites to deliver high-speed internet service to rural customers could be worth up to $1.2 billion.
Goldberg conceded Tuesday that the COVID-19 crisis has set back the LEO development process by months because many key suppliers have been negatively affected by the pandemic.
But he said Telesat is set to announce the prime contractor for the project in the coming weeks, adding he’s confident the company remains on track to have the first satellites ready for beta-testing by 2022.
“We’re executing, we’re focused, we’re moving forward,” he said.
The CEO also said Telesat aims to make up to $500 million to fund the LEO program through auctioning off its portion of the “C-band” radio spectrum in the U.S. to wireless carriers that will repurpose it for 5G networks. The federal government is currently considering a similar auction in Canada, and Goldberg said he expects a decision early next year.
Meanwhile, unlike some other high-profile tech firms that have scaled back office space during the pandemic – such as its former Elgin Street neighbour Shopify – Telesat is expanding its footprint at its downtown headquarters.
The firm’s local headcount has grown 15 per cent since the start of the pandemic and is now approaching 400 as the LEO project shifts into high gear. Telesat, which already occupied all of the 20th floor in the Place Bell building at 160 Elgin St. and leased part of the floor above, recently took over the rest of the 21st floor as well.
Goldberg said an undertaking as complex as LEO requires teams from different departments to work together seamlessly, and he believes that’s still most likely to happen in a traditional office environment.
“I’ve learned that we can be much more effective (working remotely) than I ever would have guessed we could be, but I also remain of the view that having a core group of people working under the same roof together is important,” he said.
“When it’s safe to have large numbers of people back to the office, we’ll do that.”
– With files from the Canadian Press