Satellite imagery company DigitalGlobe Inc yesterday rejected a $792.3-million takeover bid from rival GeoEye Inc, saying the hostile bid undervalued the company and its financial prospects.

The Longmont, Colorado-based company said in a statement, ''the DigitalGlobe Board of Directors reviewed GeoEye's unsolicited acquisition proposal and unanimously determined that it substantially undervalues the company."

DigitalGlobe also noted that the offer also did not adequately recognise its "superior track record of financial and operating performance" considering it has three imagery-collecting satellites it orbit, while GeoEye has only two such satellites in orbit.

Both companies have since February held talks on a potential merger, but after talks broke down, GeoEye went public with its offer on 4 May, saying that the deal would create the world's largest fleet of commercial imagery satellites. (See: Satellite imagery company GeoEye to buy rival DigitalGlobe for $792.3 million)

DigitalGlobe said that under the discussions held since 12 February it had made a counter proposal to take over GeoEye in an all-stock transaction, where DigitalGlobe's stockholders would own around 60 per cent of the combined company with GeoEye stockholders owning the remaining 40 per cent.

Since a major part of revenues for both companies are generated from US government agencies and the Barack Obama administration is considering a fresh round of budget cuts, DigitalGlobe said that it would fare better than GeoEye and terminated its takeover offer. It said that It revived the offer after GeoEye made the $792.3 million takeover proposal only to see GeoEye reject it again.

DigitalGlobe CEO, Jeffrey Tarr said in his letter to GeoEye that his company had consistently shown a superior operating performance, and GeoEye's offer was made as it unsure of its own prospects on future government orders.

The US National Geospatial-Intelligence Agency (NGA) plans to reduce its purchase of digital imagery from the two companies by half, and the Congress is to approve the cuts in the coming months.

DigitalGlobe said it could "provide substantially all of what NGA is currently receiving from both companies ... at substantially lower cost."

DigitalGlobe's market capitalisation is just over $766 million and made a loss of $28 million in 2011 on revenues of $340 million, while GeoEye has a market capitalisation of $555 million and reported net profit of $56 million on revenues of $356 million.

Founded in 1993 under the name WorldView Imaging Corporation, DigitalGlobe became EarthWatch Incorporated in 1995, before finally becoming DigitalGlobe in 2002.

In January 1994, the company merged with the commercial remote sensing efforts of Ball Aerospace Techmologies.

DigitalGlobe ImageLibrary today contains over two billion km of high quality imagery, both current and historical, including strategic places around the globe such as country capitals and other major cities worldwide, thousands of airports, ports and harbours, and millions of km of coastlines and oil basins.

More than 80 per cent of its revenues come from the US government. Commercial customers include oil and gas exploration companies and GPS manufacturers.

Its images and services are incorporated into popular mapping applications such as Google Maps and Microsoft Virtual Earth, as well as into GPS systems from DeLorme and Garmin.

Herndon, Virginia-based GeoEye is the world's largest space imaging company. It was founded in 1992 as a division of Orbital Sciences Corporation and was spun off in 1997.

It changed its name to GeoEye in 2006 after acquiring Denver, Colorado-based Space Imaging for $58 million. Space Imaging, whose main asset was the IKONOS satellite, was founded and controlled by defence equipment manufacturers Raytheon and Lockheed Martin.

GeoEye provides over 2.5 billion kms of satellite map images to Microsoft and Yahoo. Google has exclusive online mapping use of the new GeoEye-1 satellite.