DOJ Requests More Information On DigitalGlobe, GeoEye Acquisition – ValueWalk Premium

DOJ Requests More Information On DigitalGlobe, GeoEye Acquisition

The U.S Department of Justice has requested DigitalGlobe to provide more information on its proposed acquisition of fellow satellite imagery provider, GeoEye Inc. (NASDAQ:GEOY). DigitalGlobe Inc (NYSE:DGI), through a press release, revealed that the Department of Justice’s focus was placed on anti-trust matters.

DOJ Requests More Information On DigitalGlobe, GeoEye Acquisition

This request was sent to both DigitalGlobe Inc (NYSE:DGI) and GeoEye Inc. (NASDAQ:GEOY) on Friday, marking the Department of Justice’s second time to request for information related to the deal.

DigitalGlobe’s transaction, which is expected to close towards the end of the fourth quarter of this fiscal year, or during the first quarter of the next financial year, still needs approval from the National Oceanic and Atmospheric Administration and the Federal Communications Commission.

DigitalGlobe has clearly noted that it will fully cooperate with the Department of Justice, underscoring its desire to seal the deal in a timely fashion.

Long overdue

The idea of DigitalGlobe Inc (NYSE:DGI) and GeoEye Inc. (NASDAQ:GEOY) working together is long overdue. This perhaps explains DigitalGlobe’s swift decision to fully cooperate with the U.S Department of Justice, which has on some occasions been known to stall transactions.

The deal, which was inked in July of this year, involved DigitalGlobe agreeing to acquire GeoEye for about $ 900 million, creating the world’s biggest commercial imagery satellite company. The back story on the deal however, exclaims the fact that the deal was long overdue.

Apparently, GeoEye made the initial bid on DigitalGlobe. Earlier in May, it publicly placed an $805 million bid on DigitalGlobe. Despite attempted negotiations, its proposal fell through. In an interesting twist, DigitalGlobe revived the acquisition story two months later in July, albeit changing roles, and inked a deal to acquire GeoEye. We even had an opportunity to extensively cover the story, and at some point coined the punch line ‘the takeover target becomes the acquirer’, highlighting the unexpected change in roles.

Profitable venture

Creating the biggest imagery satellite company in the global front certainly comes with some perks. DigitalGlobe Inc (NYSE:DGI) and GeoEye Inc. (NASDAQ:GEOY) will not only have an opportunity to quell competition, but they will also net huge future savings of up to $1.5 million.

Similarly, the two companies will also reduce their reliance on the government. DigitalGlobe earlier revealed that the government’s share in the combined company’s revenue would amount to an estimated 50 percent- more than 10 percent less than the 63 percent that it has in DigitalGlobe currently. Through the CEO, Jeff Tar, DigitalGlobe also made it clear that the deal would result in a diversified service package, better than either of the two companies’ initial package.

As of the moment, both DigitalGlobe Inc (NYSE:DGI) and GeoEye Inc. (NASDAQ:GEOY) are in the government’s payroll, following a 10 year contract that they both signed in 2010, requiring them to meet U.S intelligent needs.


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