MONTREAL -- BCE Inc. (TSX:BCE) is selling Canada's leading satellite operator in a $3.42-billion deal.
Telesat Canada said Monday its parent company, which also owns Bell Canada, made the sale to the Public Sector Pension Investment Board and U.S.-based Loral Space and Communications Inc.
The new company will be called Telesat and will be headquartered in Ottawa.
The Public Sector Pension Investment Board, a $28-billion Crown corporation that invests on behalf of federal civil servants, the Canadian Forces, the RCMP and others, will hold a 36 per cent economic interest in the company - and majority voting control.
Loral, a long-time player in the satellite manufacturing and operations business, will hold a 64 per cent stake and minority voting control.
The transaction, which includes the assumption of $172 million of debt, is expected to close in mid-2007.
Telesat Canada is one of the pioneers in satellite communications and systems management. Created in 1969, it made history with the launch of Anik A1 in 1972 - the world's first domestic communications satellite in geostationary orbit, operated by a commercial company.
Loral said it will contribute to the new company the fixed satellite services and network services assets of its Loral Skynet subsidiary. That will make it the fourth-largest satellite operator in the world, based on the number of satellites in orbit.
Dan Goldberg, CEO of Telesat, will continue in that role with the new company.
BCE, which said last week it plans to change its name to Bell Canada Inc., had previously announced its intention to sell Telesat or make an initial public offering of its shares.
"At the outset of this process, we set three goals," BCE chief executive Michael Sabia said in a release. "First, we were determined to surface the value of the asset. Second, we wanted to make certain any transaction fully protected the future of ExpressVu. And finally, we wanted to position Telesat as a truly global player in a rapidly consolidating industry.
"This transaction meets each of those objectives. The new company will be the fourth-largest satellite services operator in the world. Global in scale, but Canadian-based and Canadian-controlled."
Telesat also said it has received approval from its board of directors to order a Nimiq 5 satellite and to provide Bell ExpressVu with access to expanded satellite capacity in the future.
"Combining the highly complementary satellite assets and comprehensive network services resources of Telesat and Loral Skynet will create a leading global satellite services operator capable of offering broadcasters, carriers, corporate users and government entities state-of-the-art, secure and reliable satellite facilities and services virtually anywhere in the world," Goldberg said.
"In addition to the combined fleet of "11 in-orbit satellites and four new satellites to be launched over the next three years, customers will benefit from the culture of professional excellence shared by Telesat and Loral Skynet."
Because of existing capital losses, the transaction will be completed on a tax-free basis. The sale is subject to regulatory approval both in Canada and the United States.
Gordon Fyfe, PSP Investments' CEO, said: "The combination of Telesat, with its strong Canadian presence, and Loral Skynet with its overseas coverage creates a great long-term growth asset for PSPIB."
The new company will have combined trailing 12 months' revenue for the period ended Sept. 30 of about $658 million and $5.6 billion of backlog orders.
BCE is Canada's largest communications company. Under the Bell brand, its services include local, long-distance and wireless phone services, high-speed and wireless Internet access, IP-broadband services, information and communications technology services, direct-to-home satellite and VDSL television services.