Communications satellite service provider Intelsat Corp. has agreed to purchase Gogo Inc.'s in-flight connectivity business for $400 million. The Luxembourg and Virginia-based company, which is still under Chapter 11 protection, said it received approval from the U.S. Bankruptcy Court of Virginia to move ahead with the acquisition.
Intelsat expects the deal to be closed by the end of March. The acquisition is expected to increase Intelsat's workforce by around 50 percent as employees from Gogo's commercial aviation services' unit join the staff.
The company plans to fund the acquisition through a $1 billion debtor-in-possession financing. Through the acquisition, Intelsat will take over Gogo's contracts as the direct provider of in-flight Wi-Fi services to more than 3,000 commercial aircraft.
Once the deal is done Gogo is expected to concentrate on its business aviation unit - which provides connectivity services to private jet operators. Gogo said in a statement it planned to use the proceeds of the sale to invest in technology that will allow it to provide 5G internet services for private aircraft.
Chicago-based Gogo has been attempting to sell its in-flight connectivity business for more than two years. Analysts said Intelsat was the perfect buyer for the business because it operated the same Ku-band satellite that Gogo uses to serve its aviation customers. Utilizing the same technology is expected to result in combined resources and corporate efforts that will generate significant savings.
Gogo's desire to sell its in-flight connectivity business reached a peak during the spread of the coronavirus pandemic as the international aviation industry ground to a halt. For its second quarter, the business unit reported losses of around $37.3 million.
Intelsat said the rebound in airline activity following an easing of the pandemic should allow it to improve the unit's finances. Analysts forecast Intelsat could potentially bring the business unit back to pre-pandemic levels by 2023.
Intelsat reportedly initiated negotiations with its bankruptcy court for the acquisition late last month. It told the court it believed the deal would offset its declining satellite broadcast revenues.
