GeoEye Offers, DigitalGlobe Rejects Offer to be Acquired

May 7, 2012

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In a flurry of news that occured late last week and over the weekend, GeoEye offered to acquire DigitalGlobe in an unsolicited offer for $792 Million. DigitalGlobe responded over the weekend by flatly rejecting the offer stating that GeoEye undervalued the company. Under threat that the National Geospatial-Intelligence Agency's EnhancedView contract might be severely cut, a contract on which both companies rely for a substantial part of their revenue, each company faces the prospect of curtailed satellite development and a reduction in force.

In a letter to DigitalGlobe's CEO Jeffrey Tarr on May 4th, GeoEye CEO Matt O'Connell stated:

"The considerable scale of the combined entity creates a strong domestic player in satellite imagery which could compete more effectively with foreign providers. The combination also allows for operating expense synergies and reduced capital requirements while better satisfying customer needs. Your letter from March 2, 2012 conveys this same sentiment."

In response, Tarr sent a letter on May 6th to O'Connell stating:

We are writing in response to GeoEye's unsolicited conditional "public offer" to acquire DigitalGlobe made in your letter dated May 4, 2012. Our board of directors has met, has carefully considered your proposal and has concluded that GeoEye's proposal is not in the best interests of DigitalGlobe and its shareholders. Accordingly, DigitalGlobe rejects your offer. Given the abruptness of your "public offer" and our past discussions, we believe you made your hostile bid in desperation due to well-publicized concerns about potential government decisions that may jeopardize your portion of the EnhancedView program.

Apparantly, discussions about a possible merger or acquistion of the two companies was underway in past weeks. On March 2nd DigitalGlobe had offered to acquire GeoEye in an all stock transaction according to DigitalGlobe's press release. Tarr reiterated that same offer in the May 6th letter to O'Connell.


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