Were Traders Tipped Off About Maxar’s Buyout?

On December 16, Maxar Technologies (TSX: MAXR) announced that it would be acquired by Advent International for $6.4 billion in an all-cash deal. Advent International is one of the largest groups of private equity investors.

The deal is expected to close in mid-2023 but is subject to a number of closing conditions, including the receipt of regulatory approvals. This news comes shortly after The Wall Street Journal reported that Advent was going to buy Maxar for “about $4 billion.”

Maxar owns and operates a constellation of satellites that allows it to collect detailed images from space. The technology powers Google Maps and is used for geospatial intelligence and defense. Founded in 1957, they have 90 satellites in orbit and employ approximately 4,400 people.

Recently, images from Maxar have been shared all over social media updating people on the Russian invasion of Ukraine, as well as geopolitical events in China and Myanmar.

Daniel Jablonsky, President and CEO of Maxar, said the “announcement is an exceptional outcome for stockholders and is a testament to the hard work and dedication of our team, the value Maxar has created, and the reputation we have built in our industry.”

Advent said that both debt and equity are financing the deal. Funds advised by Advent have committed $3.1 billion, while British Columbia Investment Management Corporation has made a minority equity investment worth $1 billion. The rest of the $6.4 billion acquisition will be funded by debt.

A Bad Year For Maxar

The $6.4 billion acquisition equates to $53 per share, a 129% premium to the stock price on the prior trading day, and approximately 34% over Maxar’s 52-week high. Maxar’s stock has taken a tumble this year, falling roughly 25% up until the buyout announcement. This comes after the company’s quarterly earnings report missed analyst expectations for the last three quarters and missed revenues by between 3% to 4.5%.

MAXR.t is up 83% on the year

A Leaky Wheel?

In a tweet from @unusual_whales, its being suggested that the day before the acquisition was announced Maxar call options on the NYSE saw a spike in trading volume, with February options seeing a spike in activity four minutes prior to the closing bell. The options as a result were up 1,500% the following day, due to the buyout news.

Canaccord Likes the Deal

Prior to the buyout, analysts had a long-term average price target of $40 on Maxar, with a total of eight analysts covering the stock. Out of the eight, one had a strong buy rating, four had buy ratings, and three analysts had hold ratings on the stock.

In the Canaccord note, which had a US$34 price target and buy rating on Maxar, the firm says that the investors, “who have had a long and winding road to the approaching launch of the first Legion satellites deal,” should be happy with the deal terms.

Canaccord believes that Maxar investors are likely getting a “much more” attractive payout from a private equity group than it would be getting from a defense company. They believe after Maxar is taken private, the company will pursue strategic M&A of NewSpace companies. They expect that the new management will likely “hone in on smallsat and satellite component manufacturing.”

BMO is Also in Favor

BMO Capital Markets’ note put a market perform rating on the stock and raised their price target to $53 from $27. They comment that the deal price is strong and that they do not believe another private equity or defense firm will step in to try and acquire the company at a higher share price.

They add that the stock was “trading at a depressed multiple” related to its peers in aerospace and defense. BMO believes that this discount was due to its leverage, potential risks associated with getting its Legion satellite launched, and investors’ “apprehension” to space infrastructure stocks.

Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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