French satellite operator Eutelsat Communications has confirmed plans to acquire UK competitor OneWeb.
Eutelsat, which has a constellation of 36 geostationary satellites, is already an investor in OneWeb with a 23% stake, which raised the question of an acquisition last year when it increased its stake. OneWeb and its constellation of 428 low earth orbit (LEO) satellites was valued at $3.4bn in its most recent funding round.
The combined company would be the first multi-orbit satellite operator offering integrated GEO and LEO provision, says Eutelsat, although London-based Inmarsat is adding LEO capability and Luxembourg-based operator SES already has a medium earth orbit (MEO) constellation alongside its GEO satellites.
A Memorandum of Understanding announced on Monday 25th July detailed the takeover (see below).
The OneWeb LEO service is expected to be fully deployed in 2023, a delay on its initial 2021 plans.
The transaction would represent a logical next step in the successful partnership between Eutelsat and OneWeb, started with Eutelsat’s equity investment in OneWeb in April 2021 and deepened with the Global Distribution Agreement announced in March 2022, says Eutelsat.
Under the terms of the transaction being discussed, Eutelsat and OneWeb shareholders would each hold 50% of the combined group’s shares.
The transaction would be structured as a contribution by OneWeb’s shareholders of their stake in OneWeb to Eutelsat in exchange for newly issued Eutelsat shares. Any combination would be subject to, among other conditions, approval by the requisite majority of Eutelsat shareholders and receipt of all relevant antitrust and regulatory including foreign investment approvals.
This is a key point at the UK government is also an investor in OneWeb, helping to rescue the London-based satellite operator from bankruptcy in 2020. The satellites were being built in Florida in a joint venture with Airbus, with pressure to bring manufacturing back to the UK.
The acquisition by Eutelsat would relieve that pressure, but replace it with the pressure from the EU for sovereign satellite capability as part of its space strategy.
OneWeb had to suspend launches by its partner ArianeSpace from the Baikonur space centre as a result of the war in Ukraine.
We will update this article as news comes in:
The two companies have since signed a Memorandum of Understanding around the deal, with negotiations continuing. The deal is expected to close by the end of the first half of 2023, which indicates there are still issues to resolve as well as regulatory approvals,
“I am delighted to announce this new and significant step in the collaboration between Eutelsat and OneWeb. Bringing together our two businesses will deliver a global first, combining LEO constellations and GEO assets to seize the significant growth opportunity in connectivity, and deliver to our customers solutions to their needs across an even wider range of applications,” said Dominique D’Hinnin, Eutelsat’s Chairman who would continue as chair. “This combination will accelerate the commercialisation of OneWeb’s fleet, while enhancing the attractiveness of Eutelsat’s growth profile. In addition, the combination carries significant value creation potential, anchored on a balanced mix of revenue, cost and capex synergies. The strong support of strategic shareholders of both parties is a testament to the huge opportunity that this combination offers and the value that will be created for all its stakeholders. This is truly a game changer for our industry.”
OneWeb’s executive chairman, Sunil Bharti Mittal of Bharti, would join the Eutelsat board.
“Having played a pioneering role in providing connectivity in the emerging world, I am excited about the possibilities of connecting the unconnected,” said Mittal. “The combination of Eutelsat and OneWeb represents a significant development in that direction as well as a unique GEO/LEO combination. The positive early results of our service together with our strong pipeline represent a very exciting opportunity in the fast-growing satellite connectivity segment, especially for customers requiring a high speed, low latency experience. Our customers are actively seeking a combined GEO/LEO offering leading us towards this important step. Bharti, as the lead shareholder of OneWeb, along with other key shareholders, is looking forward to playing a meaningful role in providing expanded connectivity through the combination of OneWeb and Eutelsat.”
The CEO of Eutelsat, Eva Berneke, would also continue in the role.
“Our initial investment in OneWeb was underpinned by our strong belief that the future growth in connectivity will be driven by both GEO and LEO capacity,” she said. “This belief has intensified as our relationship with OneWeb has deepened, first by raising our stake in the company, and then with the global distribution agreement signed a few months ago. We are now moving to the next level, with a full combination that will ensure the potential of the GEO/LEO integration is fully realized, supported by compelling financial, strategic, and industrial logic. This ground-breaking combination will create a powerful global player with the financial strength and technical expertise to accelerate both OneWeb’s commercial deployment, and Eutelsat’s pivot to connectivity. The combined entity will be geared towards profitable growth, with strong medium-term cash flow generation and a rapid deleveraging driven by strong forecast EBITDA growth. The benefits for our customers and strategic partners, who are at the centre of our strategy, are both significant and unique. This is also a very exciting opportunity for our employees who will be key to the success of this transformation.”
Eutelsat says a clear roadmap has been designed to develop over time a complementary GEO/LEO service including a common platform, hybrid terminals and a fully mutualized network creating a one-stop shop solution for customers, providing them with a unique offering and a seamless user experience.
This could further delay the commercial operation of the LEO satellite constellation. Trading under its existing name, OneWeb will continue to operate the LEO business, with OneWeb’s headquarters remaining in the UK.
Eutelsat will continue to be headquartered and domiciled in France, listed on Euronext Paris and would apply for admission to the standard segment of the UK Official List of the UK Financial Conduct Authority and to trading on the London Stock Exchange.
The Board of Directors of the combined group would consist of 15 members including ten independent directors. Seven directors, in addition to the CEO of Eutelsat, would be proposed by Eutelsat and its key shareholders and seven directors would be proposed by OneWeb and its key shareholders.
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