A complex deal to sell New York satellite firm Loral Space & Communications is on hold after its controlling shareholder balked at paying a “consent” fee to complete the $7 billion buyout, The Post has learned.
Hedge fund billionaire Mark Rachesky’s MHR Fund Management controls Loral, which derives all of its value from its 63 percent stake in Telesat, a Canadian satellite company. PSP Investments, one of Canada’s largest pension investment managers, owns the rest of Telesat.
After a months-long auction, Rachesky had reached an agreement in principle to sell Loral to the Ontario Teachers Pension Plan for more than $85 a share, a source close to the situation said.
But PSP — which would participate in the buyout by rolling over its stake and increasing its share of Telesat from 35 percent to 50 percent — wants a $300 million consent fee to agree to the transaction, a source close to the situation said.
Rachesky, a former Carl Icahn protege who has earned a reputation as a hard-nosed negotiator, doesn’t want to pay it, according to the source.
When two parties control a business, it’s not unusual for the controlling party to have consent rights, or the right to approve any buyer of the other stake. What does stand out, however, is a fee that tops four percent of the deal price, experts said.
“A consent fee of that magnitude is unusual,” said one lawyer who specializes in mergers and acquisitions.
Private-equity firms, for instance, often charge transaction fees to the businesses they acquire, but they typically amount to one percent and that comes off the sale price.
In this case, the consent fee could be paid by lowering the share price the parties are paying for Loral, said the source close to the situation.
Reuters reported late last month that talks between Rachesky and the Ontario Teachers Pension Plan had broken down and that the two were no longer negotiating a deal for Loral.
Sources told The Post that while there is a “pause” in the talks, the deal isn’t dead yet.
Loral’s shares rose 1 percent Tuesday to close at $73.77, giving it a market cap of about $2.3 billion.
Rachesky and PSP declined comment. The Ontario pension fund did not return calls.