GI Partners, a private equity firm investing out of its inaugural Data Infrastructure Fund, today announced an agreement to acquire and take-private ORBCOMM (NASDAQ: ORBC), a provider of industrial Internet of Things (IoT) solutions, for an enterprise value of $1.1bn. As part of the agreement with GI Partners, ORBCOMM shareholders will receive $11.50 per share in cash. Overall, this represents a premium of 52% to ORBCOMM’s prior day closing share price and values ORBCOMM’s equity at ~$910m.

During 2020, ORBCOMM generated $54.8m of Adjusted EBITDA, which implies GI Partners is paying a multiple of 20x EBITDA for the business. Finally, private equity firm GI Partners expects to close the ORBCOMM transaction in the second-half of 2021.

ORBCOMM – Overview

ORBCOMM is a provider of industrial Internet of Things (IoT) solutions, including network connectivity, devices, device management, and web reporting applications. The company’s goal is to help its customers realize business efficiencies, increase asset utilization, and reduce asset write-offs.

ORBCOMM’s industrial IoT products and services are able to track, monitor, control, and enhance security for numerous types of assets. Specifically, these assets include trucks, rail cars, sea containers, power generators, fluid tanks, pipelines, wells, and marine vessels, amongst others.

ORBCOMM provides its services using multiple network platforms. Firstly, the company owns a constellation of low-Earth orbit (LEO) satellites and corresponding ground stations. Secondly, the company owns terrestrial-based cellular communication services obtained through re-seller agreements with major wireless carriers. Given that GI Partners is a digital infrastructure investor, it is important that ORBCOMM owns some hard assets to support its services business.

Customers – ORBCOMM

ORBCOMM groups its customers into three main segments as follows:

(1) Original Equipment Manufacturers (OEMs)

Firstly, OEMs include Caterpillar, Doosan Infracore America, Hitachi Construction Machinery, John Deere, Komatsu, and Volvo Construction Equipment.

(2) Value-Added Re-Sellers (VARs) / Solutions Providers

Secondly, VARs and Solutions Providers are American Innovations, Onixsat, Satlink, and Sascar.

(3) End-to-End Solutions

Thirdly, a variety of different customers exist in the End-to-End Solutions category. Specifically, customers include Carrier Corporation, C&S Wholesale, Canadian National Railways, CR England, Hub Group, JB Hunt, KLLM Transport Services, Marten Transport, Prime Inc., Swift Transportation, Target, Tropicana, Tyson Foods, Walmart, and Werner Enterprises.

Revenue Model – ORBCOMM

ORBCOMM generates revenues primarily from monthly fees for industrial IoT connectivity services. Specifically, these services consist of subscriber-based and recurring monthly usage fees for each subscriber (or SIM) activated. Customers pay for their use of the company’s satellite network or cellular wireless networks that ORBCOMM re-sells to them.

Following completion of the take-private, GI Partners intends to accelerate the growth of ORBCOMM through additional investment in the company’s sales and marketing.

GI Partners – Data Infrastructure Fund

GI Partners is a San Francisco-based private equity firm, which has raised over $26bn in capital. The firm’s three primary strategies include private equity, real estate, and data infrastructure.

GI Partners is acquiring industrial IoT provider ORBCOMM through its inaugural Data Infrastructure Fund, which has $1.8bn in equity commitments. The Data Infrastructure Fund invests primarily in hard asset digital infrastructure businesses. For example, the fund’s recent investments include Blue Stream (fiber), DR Fortress (data centers), and Vast Broadband (fiber).

Transaction Advisors – ORBCOMM and GI Partners

ORBCOMM’s financial advisors include PJT Partners and Raymond James. Additionally, ORBCOMM’s legal advisor was Milbank LLP.

GI Partners’ financial advisor for the ORBCOMM take-private was Evercore. Additionally, GI Partners’ legal advisors were Simpson Thacher & Bartlett and Morgan, Lewis & Bockius.

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