US shoots down $295m AsiaSat deal

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The US state department has shot down a proposed $295m deal to take private the Hong Kong-based satellite operator Asia Satellite Telecommunications, invoking export approval powers dating back to the cold war.

GE Capital Equity Investments of the US and Beijing-controlled Citic Grouptogether control 68 per cent of AsiaSat, and had offered to buy out the company’s minority shareholders.

However, the deal was subject to approvals from several governments. AsiaSat says the state department “has in correspondence with [the company] said it will not grant the approval necessary to implement the proposed privatisation”.

AsiaSat operates three satellites built by Boeing and Lockheed Martin, and has another – AsiaSat 5 – on order with Space Systems/Loral.

Under the terms of the US International Traffic in Arms Regulations (ITAR), which govern the export of technologies with potential military applications, each sale had to be approved by the US state department.

“AsiaSat has the approvals it needs for AsiaSat 5 and the construction is going along just fine,” said one person familiar with the situation.

“Under the company’s current shareholder structure everything is fine. But [the] state [department] said: ‘If AsiaSat goes out and changes [its structure], how we approach the company is going to change’.”

GE Capital and Citic each control 34 per cent of AsiaSat, with the rest of its shares in public hands. Taking the company private would have resulted in a 50-50 shareholding between the US and Chinese partners.

According to several people close to the deal, the US government did not give any reasons for its decision, which was communicated to AsiaSat on Monday, or indicate what kind of changes it would accept.

AsiaSat and the state department both declined comment. In addition to AsiaSat 5, which was commissioned in April last year and is due to be launched from Kazakhstan in 2009, AsiaSat also requires technical updates from suppliers to operate its existing satellites.

The state department’s ruling comes just three months after China conducted a successful anti-satellite missile test.

AsiaSat’s shares fell 5.7 per cent on Wednesday, closing at HK$16.50.

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