GeoEye CEO Matt O’Connell: Budget Uncertainty Led to DigitalGlobe Merger

GeoEye‘s (NASDAQ: GEOY) decision to sign a merger agreement with DigitalGlobe (NYSE: DGI) was prompted by uncertainty over funding for a GeoEye contract with the National Geospatial-Intelligence Agency, GeoEye CEO Matt O’Connell told the Washington Business Journal.

In an interview with reporter Jill Aitoro, O’Connell estimated the 10-year, $3.8 billion contract with NGA for commercial imagery provided GeoEye close to 60 percent of revenue in fiscal year 2012.

Congress hinted GeoEye’s portion of the $7.3 billion EnhancedView program would either be delayed or reduced while DigitalGlobe’s portion would not be affected by any adjustments, Aitoro reported.

GeoEye and DigitalGlobe approved an estimated $900 million cash and stock transaction in July, saying a combined company would have higher returns in commercial and international markets.

DigitalGlobe shareowners will own 64 percent and GeoEye shareowners will own 36 percent of the combined company once the transaction completes in either late fiscal 2012 or early fiscal 2013.

O’Connell told Aitoro the merger would provide the combined company an opportunity to diversify its customer base, as 50 percent of DigitalGlobe’s overall revenue comes from the federal government.

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