SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest reported event): June 7, 1999
AMERICAN MOBILE SATELLITE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-23044 93-0976127
(State or other (Commission File No.) (IRS Employer
jurisdiction of incorporation Identification No.)
or organization)
10802 Parkridge Boulevard
Reston, Virginia 20191-5416
(703) 758-6000
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
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ITEM 5. Other Events
On June 7, 1999, American Mobile Satellite Corporation ("we" or the
"Company") entered into an Exchange Agreement (the "Exchange Agreement") with
WorldSpace Inc. ("WorldSpace") and XM Satellite Radio Holdings Inc. ("XM
Radio"), a development stage company developing a digital quality radio service
to be transmitted directly by satellite to car, home, and portable radios. When
the agreement closes, we will acquire all of WorldSpace's interest in XM Radio
in exchange for approximately 8.6 million shares of our common stock. After this
transaction, we will own all of the issued and outstanding stock of XM Radio
(subject to our interest being reduced as described below), and WorldSpace will
not own any direct equity or debt interest in XM Radio.
Concurrently with this transaction, XM Radio also has entered into
agreements pursuant to which it will issue an aggregate of $250 million of
Series A subordinated convertible notes to several new investors, including
General Motors Corporation, Clear Channel Communications Inc., and DIRECTV, Inc.
XM Radio will use $75 million of the proceeds it receives from the issuance of
these notes to redeem certain outstanding loan obligations owed to WorldSpace.
We do not expect to provide any material financing to XM Radio in connection
with XM Radio's development of its business.
These transactions are subject to a variety of closing conditions,
including WorldSpace stockholder approval and other customary closing
conditions. We currently anticipate that the transactions will close by the end
of June 1999 or early July 1999.
We will acquire all of WorldSpace's interest in XM Radio (except for $75
million of a credit facility extended by WorldSpace) in exchange for our
agreement to issue approximately 8.6 million shares of our common stock (the
"Exchange Transaction"). This Exchange Transaction will be effected as follows:
WorldSpace will establish a new trust, XM Ventures.
WorldSpace will transfer all of its right, title and interest in XM Radio,
other than a portion of certain loans totaling $75 million issued by WorldSpace,
to XM Ventures. The assets transferred to XM Ventures will include shares of XM
Radio stock owned by WorldSpace, certain other indebtedness payable to
WorldSpace, including notes convertible into shares of XM Radio stock, and
options to acquire shares of XM Radio stock.
XM Ventures will then transfer to American Mobile all of the assets
described above relating to XM Radio that it receives from WorldSpace in
exchange for 8,618,244 shares of our common stock. Of these shares,
approximately 6.4 million shares will be issued to XM Ventures at the closing of
the Exchange Transaction. We must obtain the approval of our stockholders before
we are able to issue the remaining 2.2 million to XM Ventures. After we obtain
this stockholder approval, we will issue the remaining shares to XM Ventures.
Using part of the proceeds from the issuance of its Series A subordinated
convertible notes described below, XM Radio will pay WorldSpace $75 million to
redeem the outstanding loans payable to WorldSpace.
Concurrently with the above transactions, XM Radio will be recapitalized.
We will hold 125 shares of XM Radio Class B stock, which will be the only shares
of XM Radio's capital stock that will be outstanding. We will also hold certain
XM Radio debt, convertible into Class B common stock and subordinated to the
Series A convertible notes. The Class B stock of XM Radio will have three votes
per share. XM Radio also will have Class A common stock entitled to one vote per
share. The Class B stock of XM Radio will be convertible into Class A stock upon
the occurrence of certain events.
At the closing of the Exchange Transaction, XM Radio will issue an
aggregate of $250 million of Series A subordinated convertible notes to six new
investors -- General Motors, $50 million; Clear Channel Communications, $75
million; and DIRECTV, $50 million; and Columbia Capital, Telecom Ventures,
L.L.C. and Madison Dearborn, $75 million. The Series A convertible notes issued
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by XM Radio will be convertible into shares of either XM Radio's Class A common
stock or XM Radio Series A convertible preferred stock at the election of the
holders or upon the occurrence of certain events, including an initial public
offering of a prescribed size. On a fully diluted basis after giving effect to
the conversion of all then-outstanding convertible notes of XM Radio, we will
own slightly less than 40% of the equity of XM Radio, and we will have in excess
of 60% of the voting power in XM Radio, assuming exchange of the Baron Asset
Fund exchangeable note previously reported.
Except for affiliated transactions, we will not be permitted to transfer
any of our shares of XM Radio's common stock until the earlier of the date on
which XM Radio begins commercial operations or one year after the closing of an
initial public offering of shares of XM Radio. Shares of XM Radio Class B stock
are transferable to non-affiliates only upon conversion into shares of XM Radio
Class A stock.
Upon closing of the transaction, XM Radio will also sign a long-term
distribution agreement with General Motors. Under this agreement, GM will
exclusively distribute and market XM Radio service in GM vehicles, and will
factory install XM Radio receivers, manufactured by XM Radio's consumer
electronics partners, in both cars and trucks.
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Item 7. Financial Statements and Exhibits
(c) Exhibits
The following documents are filed as exhibits to the report:
Press Releases of the Company and XM Radio dated June 8, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN MOBILE SATELLITE
CORPORATION
By:/s/Walter V. Purnell, Jr.
Walter V. Purnell, Jr.
President and Chief Executive Officer
Date: June 8, 1999
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EXHIBIT INDEX
Exhibit
Number Exhibit
99.1 -- American Mobile Satellite Corporation Press Release dated June 8,
1999 (filed herewith).
99.2 -- XM Satellite Radio Corporation Press Release dated June 8, 1999
(filed herewith).
EXHIBIT 99.1
AMERICAN MOBILE ANNOUNCES AGREEMENT
TO ACQUIRE REMAINING INTERESTS IN XM SATELLITE RADIO
WorldSpace To Receive Stock for Debt And Equity Stake
Strategic Financial Partners To Invest $250 Million in XM
Reston, Va. - June 8, 1999 - American Mobile Satellite Corporation (NASDAQ:
SKYC) today announced that it has agreed to acquire all of WorldSpace, Inc.'s
debt and equity interests in XM Satellite Radio Inc. of Washington, DC that
would return XM to its previous status as a wholly-owned subsidiary of American
Mobile. WorldSpace's position in XM would be acquired in exchange for 8.6
million shares of American Mobile stock, following the retirement of $75 million
of WorldSpace debt by XM.
In a related and concurrent announcement, XM reported a $250 million investment
commitment by industry leaders DIRECTV, Clear Channel Communications and General
Motors Corporation, along with financial investors Telcom Ventures L.L.C.,
Columbia Capital and Madison Dearborn Partners.
"Since our earliest involvement with digital audio radio service (DARS), we have
viewed XM Radio as an extraordinary business opportunity," said Gary M. Parsons,
chairman of both American Mobile and XM. "We are extremely pleased to
consolidate our leadership position in this emerging market. And, with the
combination of our recently announced wireless email initiative eLink (sm), and
our expanded stake in XM, we are excited about the growth potential and enhanced
market position of American Mobile."
In addition to the investment agreements, XM separately announced a long-term
distribution agreement with General Motors. General Motors will exclusively
distribute and market XM service and will factory install AM/FM/XM-compatible
radios in new GM cars and trucks. In remarks addressing the related
announcements, Parsons noted, "The quarter billion dollar investment from this
'dream team' of industry leaders is a tremendous vote of confidence in the
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future of satellite radio and XM. As important as the investment, however, are
the related programming, operational, advertising and distribution alliances
that these new investor companies provide to XM Radio."
The $250 million investment in XM is in the form of convertible debt. Assuming
conversion of all such convertible debt to equity, American Mobile's financial
interest in XM will be reduced to slightly less than 40 percent, but it would
retain in excess of 60 percent of the voting power in XM at that time. American
Mobile anticipates that the closing of these concurrent transactions will take
place within 30 days, following receipt of certain stockholder approvals and
other conditions.
XM Satellite Radio Inc. is committed to becoming America's "next band of radio"
by delivering up to 100 channels of digital audio service with crystal-clear
sound from coast to coast. For less than $10 a month, subscribers will receive
the best, most compelling mix of digital-quality music, talk, news, sports and
entertainment formats available. The company, formerly American Mobile Radio
Corporation, obtained one of only two satellite digital audio radio service
(SDARS) licenses from the FCC in October, 1997. First there was AM, then FM and
now XM, the next generation of radio. For more information, please visit the
company's web site at www.xmradio.com.
American Mobile (www.ammobile.com) owns and operates an integrated
terrestrial/satellite network and provides a wide range of mobile communications
services, including digital voice dispatch, data communications, dual-mode
mobile messaging, position reporting services and satellite telephone to the
continental United States, Alaska, Hawaii, Puerto Rico, the U.S. Virgin Islands
and hundreds of miles of U.S. coastal waters. American Mobile services are used
in transportation, field service, maritime and telemetry markets and with eLink
(sm) in the two-way wireless messaging market.
# # #
Factors that could cause forward-looking statements in this news release to
differ materially from the actual results are discussed in American Mobile
Satellite Corporation's Form 10K for the year ended December 31, 1998, and other
periodic filings the company has made with the Securities and Exchange
Commission. Copies of the filings are available upon request from American
Mobile Satellite Corporation's Investor Relations Department.
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****PLEASE NOTE****
American Mobile will hold an Analyst Conference Call
Today, Tuesday June 8th at 11:00 a.m. (EDT)
Call-in Telephone Number: 888-243-0814 or 703-925-2401
Replay Number: 888-266-2081 or 703-925-2533, password 1624727
For more information contact:
Eric Swank Melissa Andrews
Director, Investor Relations XM Satellite Radio Inc.
American Mobile 301-320-5973
703-758-6121 [email protected]
[email protected]
Donald L. Campbell Vicki Stearn
Director, Corporate Communications XM Satellite Radio Inc.
American Mobile 202-969-7070
703-758-6280 [email protected]
[email protected]
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EXHIBIT 99.2
CONTACT:FOR IMMEDIATE RELEASE
Vicki Stearn 202-969-7070 [email protected]
CLEAR CHANNEL, DIRECTV, GENERAL MOTORS &
A PRIVATE INVESTMENT GROUP TAKE COMBINED
$250 MILLION STAKE
IN XM SATELLITE RADIO
Strategic Alliance to Pursue $2 Billion Emerging Satellite Radio Market
XM Also Inks Exclusive Agreement to Provide Service in GM Vehicles
June 8, 1999, Washington, DC - Clear Channel Communications Inc., DIRECTV Inc.,
The General Motors Corporation, and a private investment group comprised of
Columbia Capital, Telcom Ventures L.L.C., and Madison Dearborn Partners hit the
accelerator on the emerging satellite radio market by making a $250 million
combined investment commitment in XM Satellite Radio Inc. The announcement was
made today by Hugh Panero, President and CEO of XM.
XM is a revolutionary new band of radio that will capitalize on direct
satellite-to-receiver broadcasting technology to provide listeners in the car
and at home with up to 100 channels of music, news, and entertainment available
coast-to-coast with digital-quality sound. C.E. Unterberg, Towbin recently
estimated the market for satellite radio to be over $2 billion by 2005.
"XM is thrilled to announce this dream-team alliance with General Motors,
DIRECTV, and Clear Channel, the largest car manufacturer, the largest direct
broadcast satellite company, and one of the largest and most profitable radio
groups in the United States," said Hugh Panero, "as well as entrepreneurial
investors like Columbia Capital, Telcom Ventures and Madison Dearborn Partners
with their vast experience in the telecommunications sector."
"Our business is delivering satellite digital radio primarily to the car where
most radio listening is done, and these companies with their respective
expertise in the automotive, direct broadcast satellite, telecommunications, and
radio businesses give new meaning to the term strategic partner," Panero added.
<PAGE>
Page Two
Partners Provide Expertise, Capital
To facilitate the transaction announced today, American Mobile Satellite
Corporation, XM's majority shareholder, purchased the remaining equity and debt
interests previously held by WorldSpace, Inc. Simultaneously, General Motors,
Clear Channel, DIRECTV, and the private investment group comprised of Columbia
Capital, Telcom Ventures, and Madison Dearborn Partners made a combined
investment of $250 million in XM convertible debt, with $75 million each coming
from Clear Channel and the private investment group and $50 million each coming
from General Motors and DIRECTV.
Gary Parsons, Chairman of American Mobile as well as Chairman of XM, said, "XM
has a bright future and we're delighted to be allying with such an extraordinary
group of strategic partners. XM has accomplished an impressive amount in the
last year, creating a new brand identity, hiring an outstanding slate of
executives, and closing deals with more than a dozen elite manufacturing and
programming companies."
In addition to their investments, both Clear Channel and DIRECTV will develop
differentiated entertainment services for XM utilizing channel capacity on the
XM service. In addition, DIRECTV will provide its expertise to support the
implementation of XM's customer service, billing, and conditional access
capabilities. The two companies will also explore other areas of cooperation in
the future.
"We are always exploring ways of complementing our existing assets to produce
value for our shareholders. Examples of this effort include our ongoing internet
strategy, our investment in USA Digital, and now our investment in XM Radio.
Every day we help thousands of local businesses across the nation market their
products and services through our FM and AM radio stations, as well as our
television stations and outdoor displays. We will soon have the further ability
to serve entirely new categories of listeners and advertisers through this new,
truly national distribution platform." said Lowry Mays, Chairman and CEO of
Clear Channel.
"As the pioneer of the direct broadcast satellite television industry, DIRECTV
is pleased to become a partner with XM in the emerging satellite radio business.
XM will offer commuters fresh, new satellite-direct audio entertainment options
much like DIRECTV has done in delivering unparalleled choices in multi-channel
entertainment to millions of households across the country. The synergies
between our companies are obvious," said Eddy Hartenstein, President of DIRECTV.
In a joint statement, Rajendra Singh, Telcom Ventures founder, Jim Fleming,
Columbia Capital, Managing Director and Jim Perry Jr., Madison Dearborn
Partners, Managing Director, commenting on the investment said, "We are big
believers in satellite radio as an entertainment and data delivery system to the
car. XM is a terrific investment and we are excited to be part of it."
<PAGE>
Page Three
XM Inks Exclusive Deal with General Motors
To Provide XM Service in GM Vehicles
In addition to the investment deal announced today, XM also announced a
long-term distribution agreement with General Motors. GM will exclusively
distribute and market XM service in GM vehicles. General Motors will factory
install AM/FM/XM-compatible radios, manufactured by XM's consumer electronics
partners, in both cars and trucks.
"We're delighted to be partnering with the auto industry market leader to bring
satellite radio to the car. The factory installation of XM-compatible radios in
cars and trucks is a huge step towards making XM radio as ubiquitous as AM/FM
radios and cassette players are today," said XM's Panero.
XM Prepares for Commercial Launch
In the last year, XM has made best-of-brand alliances with electronics industry
leaders Alpine, Pioneer, Sharp, and Delphi Delco to design, manufacture and
market AM/FM/XM radios for the car, home, and portable radio market.
XM has also cut more than a dozen major programming deals including USA TODAY,
the nation's largest selling newspaper; CNNfn, The Financial Network; CNN/Sports
Illustrated; CNN en Espanol; BET and Radio One, leaders in cable TV and radio,
respectively, with six exclusive XM channels designed for African-Americans;
Bloomberg News Radio; C-SPAN Radio; One-On-One Sports, the nation's largest live
24-hour sports talk radio network; Hispanic Broadcast Corporation (formerly
Heftel Broadcasting Corp.), the country's largest Spanish-language radio
broadcaster, with five Spanish-language channels exclusively for XM; Salem
Communications Corporation, the nation's premier Christian broadcaster, with
three channels exclusively for XM; and AsiaOne, a major provider of Asian news
and entertainment.
Subscribers will receive the XM signal using one of four radio and antenna
configurations: an easily connected portable XM adapter for existing car radios;
a line of AM/FM/XM replacement radios available through consumer electronics and
car audio retailers; an AM/FM/XM system factory or dealer installed into new
model cars; and portable radios and component audio systems for the home and
office. It is anticipated that the XM service and XM-capable radios will be
available in a wide variety of retail outlets.
XM radio service will be available utilizing two high-powered satellites built
by Hughes Space & Communications International and Alcatel, and launched from
Boeing's SeaLaunch platform. XM is also building a terrestrial network, which is
being designed by LCC International, the world's largest wireless engineering
and design companies and an affiliate of Telcom Ventures. XM will begin its
operations at the end of 2000 with commercial service available in the U.S. from
coast to coast in 2001.
# # #
Page Four
American Mobile Satellite Corporation (NASDAQ:SKYC) (www. ammobile.com) owns and
operates an integrated terrestrial/satellite network and provides a wide range
of mobile communications services, including digital voice dispatch, data
communications, dual-mode mobile messaging, position reporting services and
satellite telephone to the continental United States, Alaska, Hawaii, Puerto
Rico, the U.S. Virgin Islands and hundreds of miles of U.S. Coastal waters.
American Mobile services are used in transportation, field service, maritime,
two-way messaging and telemetry markets. Factors that could cause
forward-looking statements in this news release to differ materially from the
actual results are discussed in American Mobile Satellite Corporation's Form 10K
for the year ended December 31, 1998, and other periodic filings the company has
made with the Securities and Exchange Commission. Copies of the filings are
available upon request from American Mobile Satellite Corporation's Investor
Relation Department.
Clear Channel Communications, Inc. (NYSE:CCU) is a globally diversified media
and outdoor advertising company and is a world leader in out-of-home media.
Including all pending acquisitions, Clear Channel operates, or is affiliated
with, 625 radio stations, 19 television stations and approximately 302,000
outdoor advertising displays in 26 countries worldwide. Clear Channel also owns
29% of Hispanic Broadcast Corporation (formerly Heftel Broadcasting Corp.)
(NASDAC: HBCCA), the largest Spanish-language radio broadcaster in the United
States. Clear Channel's stock is traded on the New York Stock Exchange under the
symbol "CCU."
Columbia Capital, LLC ("Columbia Capital") is one of the premier private equity
firms focused exclusively on the communications and information technology
industries, investing in both emerging service providers and innovative, next
generation technologies. The principals of Columbia Capital have been investing
in communications and technology for over a decade and Columbia Capital is the
manager of Columbia Capital Equity Partners II, L.P., a $420 million investment
fund raised in 1999. Columbia Capital is located in Alexandria, Virginia.
DIRECTV is the nation's leading provider of digital television entertainment
service with more than 7 million subscribers, including subscribers to the
recently acquired PRIMESTAR medium-power direct broadcast satellite service.
DIRECTV and Commercial Choice are trademarks of DIRECTV, Inc., a unit of Hughes
Electronics Corporation. The earnings of Hughes Electronics are used to
calculate the earnings per share attributable to GMH common stock.
General Motors Corp. Founded in 1908, General Motors (NYSE:GM) (www.gm.com) has
grown into the world's largest industrial corporation and full-line vehicle
manufacturer. In 1998, the company employed approximately 594,000 people and
partnered with over 30,000 supplier companies worldwide. As the largest U.S.
exporter of cars and trucks, and having manufacturing, assembly, or component
operations in 50 countries, General Motors has a global presence in over 190
countries. Along with designing, manufacturing, and marketing of vehicles,
General Motors has substantial interests in telecommunications and space,
consumer and automotive electronics, financial and insurance services,
locomotives, and heavy-duty automatic transmissions.
Madison Dearborn Partners Inc. ("MDP") is one of the largest and most
experienced private equity investment firms in the United States. MDP's
principals manage Madison Dearborn Capital Partners III, up to a $2.22 billion
investment fund raised in 1998, Madison Dearborn Capital Partners II, L.P., a
$925 million investment fund raised in 1996, and Madison Dearborn Capital
Partners, L.P., a $550 million investment fund raised in 1993. Previously, MDP's
principals built a $2 billion management buyout and venture capital portfolio at
First Chicago Corporation. MDP focuses on management buyout transactions and a
wide range of other private equity investments, including growth equity
financings, recapitalizations, and acquisition-oriented financing transactions.
MDP focuses on investments in several specific industries, including
Page Five
communications, natural resources, consumer, healthcare, and financial services.
MDP also invests in a broad spectrum of industrial firms.
Telcom Ventures, L.L.C., through its affiliates, is engaged in a broad range of
entrepreneurial activities in the international wireless communications
industry. Telcom Ventures grew out of LCC International as the investment arm to
capitalize on emerging opportunities in wireless communication. Since its
inception, Telcom Ventures has been a founding shareholder of cellular operation
consortia in Asia, Europe and Latin America. Telcom Ventures has also
successfully developed several wireless communication companies, including
Teligent Inc., that provide voice, information, and high speed data
communications both in the United States and throughout the world.
XM Satellite Radio (www. xmradio.com) is committed to becoming America's "next
band of radio" by delivering up to 100 channels of digital audio service with
crystal-clear sound from coast to coast. For less than $10 a month, subscribers
will receive the best, most compelling mix of digital-quality music, talk, news,
sports and entertainment formats available. XM Satellite Radio Inc. is owned by
American Mobile Satellite Corporation (NASDAQ:SKYC). The company obtained one of
only two satellite digital audio radio service (SDARS) licenses from the Federal
Communications Commission in October 1997. First there was AM, then FM and now
XM, the next generation of radio.
# # #
FOR ADDITIONAL INFORMATION:
American Mobile
Don Campbell 703-758-6280 [email protected]
Clear Channel Communications
Houston Lane 210-228-2828 [email protected]
Columbia Capital
Jim Fleming 703-519-2000 [email protected]
DIRECTV
Bob Marsocci 310-726-4656 [email protected]
General Motors
Mark Tanner 212-418-6380
Madison Dearborn Partners
Jim Perry Jr. 312-895-1220 [email protected]
Telcom Ventures L.L.C.
Rahul Prakash 703-706-3808 [email protected]
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