BROOMFIELD, Colo. – Gogo Inc . (NASDAQ: NASDAQ:GOGO) announced today its definitive agreement to acquire Satcom Direct, a move that positions Gogo as the only in-flight connectivity provider capable of meeting the diverse needs of the global business aviation and military/government mobility markets.
The acquisition, valued at $375 million in cash and five million shares of Gogo stock, with potential additional payments of up to $225 million tied to performance milestones, is set to enhance Gogo's market presence significantly. Satcom Direct, known for its global business aviation geostationary satellite services, is projected to generate $485 million in revenue in 2024 with an EBITDA margin of 17%.
Gogo Chairman and CEO Oakleigh Thorne stated that this transaction propels the company's growth strategies by expanding its addressable market and delivering high-performance satellite solutions alongside world-class customer support. The integration of Satcom Direct's services with Gogo's offerings will provide a comprehensive GEO-LEO satellite solution for the fast-growing military/government mobility market.
The strategic and financial benefits of the acquisition include the establishment of a unique LEO-GEO-ATG product line for business aviation, entry into the military/government mobility vertical, and an expanded platform for new product sales and services. The combined company is expected to achieve $25-30 million in annual cost synergies within two years post-closing, with a pro forma 2024 revenue of approximately $890 million, an adjusted EBITDA margin of 24%, and over $100 million in free cash flow.
The transaction, which has been approved by Gogo's Board of Directors, is subject to regulatory approvals and customary closing conditions, with an anticipated closure by the end of 2024. The acquisition will be financed through cash-on-hand and $275 million in new debt, with Gogo expecting to return to its target net leverage range within two years after closing.
This consolidation is set to create a formidable entity in the in-flight connectivity sector, with Gogo leveraging Satcom Direct's existing products, expertise, and customer base to enhance its offerings and drive long-term value creation for shareholders.
The information in this article is based on a press release statement from Gogo Inc.
In other recent news, Gogo Inc. has been making significant strides in the aviation communications sector. The company has secured contracts to complete 25 Supplemental Type Certificates (STCs), expanding its Gogo Galileo HDX broadband connectivity to a wide array of business aircraft. Gogo has also committed $52.5 million to its partnership with Eutelsat OneWeb to enhance its service offerings.
In terms of financial performance, Gogo reported a slight 1% decrease in total revenue for the second quarter of 2024, amounting to $102.1 million, primarily due to a decline in equipment revenue. However, the company's service revenue saw a 4% increase, reaching a record high of $81.9 million. Roth/MKM maintains its buy rating on Gogo shares.
The company has also entered into a multi-year agreement with Airshare, a rapidly expanding private aviation operator, offering advanced in-flight connectivity options. Furthermore, Gogo has partnered with Skyservice Business Aviation to secure Supplemental Type Certificates for its Gogo 5G service. Despite the delay in the launch of Gogo 5G to the second quarter of 2025, Gogo Inc. has updated its 2024 financial guidance, anticipating revenue ranging from $400 million to $410 million. These are the recent developments concerning Gogo Inc.
InvestingPro Insights
As Gogo Inc. (NASDAQ: GOGO) moves forward with its acquisition of Satcom Direct, investors should consider some key financial metrics and insights from InvestingPro. The company's market capitalization stands at $919.13 million, reflecting its current position in the market before the acquisition's impact.
Gogo's P/E ratio of 14.19 suggests that the stock is reasonably valued compared to its earnings, which could be attractive to value investors considering the potential growth from the Satcom Direct acquisition. This is particularly relevant given that Gogo has been profitable over the last twelve months, with a gross profit margin of 67.02% for the same period.
However, InvestingPro Tips highlight that Gogo's net income is expected to drop this year, which investors should weigh against the projected benefits of the Satcom Direct acquisition. On a positive note, the company's liquid assets exceed short-term obligations, indicating a strong financial position to support the acquisition and integration process.
It's worth noting that Gogo's stock price has fallen significantly over the last three months, with a three-month price total return of -24.74%. This recent dip could present an opportunity for investors who believe in the long-term potential of the Satcom Direct acquisition.
For those seeking a more comprehensive analysis, InvestingPro offers additional tips and insights that could be valuable in assessing Gogo's future prospects in light of this strategic move.
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