Gogo Inc. said it's selling its commercial aviation business to Intelsat for $400 million.
The Chicago company's (Nasdaq: Gogo) division provides web access to passengers in commercial airplanes. Gogo said Luxembourg-based Intelsat will operate the commercial aviation business as an independent business unit, led by current President John Wade, and the business will remain based in Chicago.
The sale doesn't come as a surprise. A few weeks ago, Gogo, which was hammered by the Covid-19 crisis that crippled the nation's airlines, said it wanted to sell the commercial aviation business. In the second quarter, its North American commercial aviation business' total revenue decreased to $30 million, down 72% from a year earlier. In the rest of the world, its commercial aviation total revenue decreased to $12 million, down 67% from a year earlier.
"Following a competitive strategic review process, we're confident this transaction unlocks the full value of the CA (Commercial Aviation) business for shareholders. Combining CA, the leading inflight connectivity provider, with Intelsat, the world's largest global satellite operator, will create the leading vertically-integrated in-flight connectivity business in the world, with the additional resources and scale to support continued growth and innovation as demand for commercial air travel recovers," said Oakleigh Thorne, Gogo president and CEO, in a statement.
Gogo said it will use the $400 million to improve its net debt position and continue to invest in growth opportunities such as Gogo 5G, as well as concentrate on its business aviation (BA) business, which "continues its sharp recovery and strong demand growth trajectory, and our BA segment is exceptionally well-positioned to drive long-term value creation in that industry."
In Tuesday pre-market trading, shares in Gogo were up more than 25%, rising $1.32 to $6.46.
