In order to create a European powerhouse that can compete with Elon Musk's SpaceX, Eutelsat and OneWeb are preparing to merge in an all-share deal valued at $3.4 billion for the UK satellite operator, according to a report by Bloomberg.
According to a statement released by the firms on Tuesday, OneWeb stockholders will own 50% of Eutelsat, which will remain listed in Paris and apply to be listed on the London Stock Exchange.
The agreement is the newest merger that has evolved into a competition between businesses and governments to provide quick access via low-orbit satellites.
Merging Government-Owned Entities
It is worth noting that OneWeb and Eutelsat are both owned by the UK and French governments, and the UK will continue to have a special share that gives it some veto power over business-related decisions like where to locate the company's headquarters.
Even though shareholders would split the company, the agreement has a look and feel of a Eutelsat takeover, according to Bloomberg.
OneWeb will continue to operate the combined group's low-orbit business under its name, with a principal listing in Paris. Dominique D'Hinnin, chairman of Eutelsat, will serve as the combined company's chairman, with Sunil Bharti Mittal, chairman of OneWeb, serving as vice president.
Additionally, the new organization will be led by Eutelsat Chief Executive Officer Eva Berneke.
According to a statement from the UK government, it has consented to several national security privileges and for OneWeb to favor purchasing goods from UK-based manufacturers.
At the same time, France and UK will be represented on the board.
"Unique Position"
OneWeb, established in 2012, failed in 2020 because lead investors withdrew their funds during the COVID-19 outbreak. To safeguard a potentially crucial tech asset after Brexit, the UK government contributed roughly $500 million as part of a $1 billion collaboration with Bharti Global.
According to the firms, the merger will provide Eutelsat with a "unique position" in the market and could result in investments, cost efficiencies, and an increase in revenue of 1.5 billion euros ($1.53 billion).
Bloomberg reported that Monday's market response to the transaction was unfavorable, with shares of Eutelsat falling 18% after sale talks were announced. On Tuesday, July 26, the share price was still unchanged.
Additionally, Eutelsat will put a two-year hold on paying out dividends following this year to support the launch of OneWeb's next round of satellites.
According to a research report by Deutsche Bank analyst Roshan Ranjit, government contracts and short-term cash burn are two issues that the combination raises.
Connections To Russia
Bloomberg noted that OneWeb and Eutelsat both offer different connections to Russia. After Russia halted planned satellite deployments with the French rocket manufacturer Arianespace SA, OneWeb said in March that it would launch satellites using SpaceX.
Even in the face of pressure from European regulators, Eutelsat has continued to offer a limited number of satellite services to Russia. According to its website, it reaches 50% of houses in Russia and the surrounding area.
This is because the company has a "policy of neutrality," as stated by Berneke.
Bloomberg reported that the merged entity expects its fiscal 2022-2023 revenue to be 1.2 billion euros and its EBITDA to be 0.7 billion euros.
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Written by Joaquin Victor Tacla
