European operator Eutelsat and U.K. satellite operator OneWeb will partner in a $3.4 billion deal in an effort to compete with SpaceX, founded by Elon Musk.
A new release on Tuesday revealed that Eutelsat would be issuing 230 million new shares and exchanging them for the shares in OneWeb, where shareholders in both companies would own 50% of the new firm, respectively. OneWeb is valued at $3.4 billion in the deal.
After being combined, the merged entity will make about $1.2 billion dollars in the 2022-23 fiscal year, the companies announced.
The combined company will continue to be run by Eutelsat’s Dominique D’Hinnin and Eva Berneke, with OneWeb’s Sunil Bharti Mittal as its co-chairman.
Eutelsat’s chairman, D’Hinnin claimed that the agreement will benefit the businesses “seize the significant growth opportunity in connectivity.”
“This combination will accelerate the commercialisation of OneWeb’s fleet, while enhancing the attractiveness of Eutelsat’s growth profile,” he added.
OneWeb’s goal is to distribute 648 low-earth orbit satellites that would provide broadband to rural areas. With its current 428 satellites in orbit, it will now merge with Eutelsat’s fleet of 36 geostationary orbit satellites.
OneWeb, an emerging opponent to SpaceX’s and Amazon’s ambitious satellite internet projects, has not been able to turn its plans into a profitable idea.
Following billions of dollars in venture capital burnt, the company emerged from bankruptcy in 2020 with the help of the British government. $500 million is being given to the company by the government in the form of a bailout package.
With CEO Neil Masterson describing it as “another bold move” in advancing the company’s objective, OneWeb is expecting that the merger with Eutelsat will aid in turning around its financial situation.
“This combination accelerates our mission to deliver connectivity that will change lives at scale and create a fast growing, well-funded company which will continue to create significant value for our shareholders,” Masterson said.
There was an apprehension among investors when the Eutelsat takeover was announced Tuesday, with shares of Eutelsat dropping to their lowest point since 2020. In order to focus on launching OneWeb’s satellite constellation, Eutelsat said it would temporarily suspend its dividend.
The agreement must pass a number of regulatory reviews, including a rigorous national security clearance procedure in the UK. By the first part of 2023, it should be finished.
The UK government owns a “special share” that provides it voting rights on issues pertaining to national security, such as the network security requirements of OneWeb and the location of its headquarters. This share is not included in the deal.
At a critical time in London’s governance, the space industry is diluting their power over it. Members of the British Conservative Party will choose who will be the new prime minister after Boris Johnson’s resignation.
The Conservatives’ constituency is certain to want a new Prime Minister who will defend Britain’s most treasured assets from foreigners following Brexit.
Nvidia’s botched attempt to acquire U.K. chip designer Arm and the Chinese company’s acquisition of Newport Wafer Fab raise the issue of foreign takeovers to a new level of sensitivity.
OneWeb will maintain its existing name and keep its headquarters in the United Kingdom under the agreement. A second listing on the London Stock Exchange is something that Eutelsat, which is already listed in Paris, intends to pursue.
But as part of the agreement, the government will also join an odd group of shareholders in Eutelsat, which also includes the Chinese government. That might cause the United States and other close allies of Britain to wonder.
In a post-bailout financing round, Eutelsat had already purchased a stake in OneWeb last year. These backers of OneWeb include Indian businessman Sunil Bharti and Japanese technology investor SoftBank.