DigitalGlobe is buying rival satellite company GeoEye in a cash and stock deal worth about $453 million.
DigitalGlobe, which collects satellite and aerial images that are used for defense and intelligence, mapping, environmental monitoring and other uses, said Monday that the tie-up creates a more efficient and diversified company better positioned to thrive as the Pentagon makes severe budget cuts.
Under the terms of the agreement, approved by the boards of both companies, shareholders of GeoEye Inc. can chose to receive either $20.27 in cash, 1.425 shares of DigitalGlobe Inc. stock, or a combination of 1.137 shares of stock and $4.10 per share in cash, for each of their GeoEye shares.
The cash offer represents a 34 percent premium over Herndon, Va., company's closing stock price of $15.17. GeoEye shares jumped nearly 40 percent on the news, while shares of DigitalGlobe, based in Longmont, Colo., rose 15 percent.
Based on DigitalGlobe's Friday closing stock price of $14.22, the all stock option is worth about $20.26 per GeoEye share, while the cash and stock option is worth $20.27 per share. The deal is worth about $453 million based on GeoEye's about $22.4 million outstanding shares, but the companies valued the agreement at about $900 million.
DigitalGlobe shareowners will own about 64 percent of the company, while GeoEye shareowners will own about 36 percent. The new board will include six current DigitalGlobe directors and four GeoEye members.
The deal, which is expected to be completed by the end of the first quarter of 2013, is subject to approvals by the shareholders of both companies and regulators. The largest shareholders of have already vowed support.
The companies have been eying a deal for months. DigitalGlobe in May that it rejected an offer from GeoEye worth $792 million, and revealed that it had already bid for GeoEye.
In premarket trading, GeoEye shares jumped $5.94, or 39 percent, to $21.11, while Digital Globe rose $2.08, or 15 percent, to $16.30.