Breaking News: DigitalGlobe + GeoEye = ?

[UPDATE May 7, 2012] DigitalGlobe rejects acquisition offer and refers to it as ‘hostile’.
 
This morning has been met by a flurry of activity concerning the commercial space sector. GeoEye has reached out publicly to DigitalGlobe with an acquisition offer of $792m of part stock and part cash. The combined company would be the biggest space imaging company in the world with the largest number of assets in space.
 
For both GeoEye and DigitalGlobe, the majority of revenue comes from the EnhancedView contract from the US government’s National Geospatial-Intelligence Agency (NGA). Unlike space imaging assets managed by the National Reconnaissance Office, the EnhancedView contract allows the US Government to more easily share geographic intelligence with its international allies.
 

Faced with reduced defense budgets, this contract, which has been a pillar in the commercial space imagery market has come under fire. “This proposal represents the most prudent course of action for both GeoEye and DigitalGlobe, given the continuing uncertainty in the market created by the U.S. government’s budget review process for 2013 and beyond,” GeoEye CEO Matt O’Connell.
 

At Tomnod we have been working with the commercial space imaging sector for our GlobalInsight crowdsourced image annotation platform. Our work with GeoEye during the Valley of the Khans expedition and our recent work in Somalia and Syria with DigitalGlobe leaves us bullish about the capabilities of both of these companies.
 

Still some questions remain:
* At the time of the acquisition offer, the market cap of DigitalGlobe was ~$607M vs. GeoEye’s ~$535M. Is it possible that GeoEye, the smaller player, made this public offer in order to establish a superior position over DigitalGlobe? Was this a result of broken down talks between the two companies behind closed doors?
[update] According to the investor call, DigitalGlobe and GeoEye had been talking for the last few months in private and DigitalGlobe has already rejected this exact offer. GeoEye’s response was to make it public. Interesting strategy.
[UPDATE May 7, 2012] Looks like we were right about this one. DigitalGlobe rejects acquisition offer and refers to it as ‘hostile’ whereas GeoEye referred to it as ‘friendly’.
 

* How will the EnhancedView contract be shaped for the combined company?
 

* As of 10AM EST May 4, 2012, Reuters reported that DigitalGlobe has already turned down the offer. That seems like a fast turnaround if Reuter’s reporting is true.
[update] Turns out the DigitalGlobe board is reviewing the offer according to Reuters.
 

* How does this move affect Skybox Imaging who recently closed a series C venture financing of $70m to deploy their own commercial space assets. Also, how does this affect the entire commercial space industry?
 

Here is another good article with good commentary.
 

What do you think? Leave a comment below.