Eutelsat Communications confirmed it is mulling the acquisition of OneWeb after news reports highlighted the possibility of a deal that would create a multi-orbit satellite heavyweight.
“The combined entity would be the first multi-orbit satellite operator offering integrated GEO and LEO solutions and would be uniquely positioned to address a booming [roughly] $16 billion (by 2030) satellite connectivity market,” Eutelsat said in a July 25 statement.
Publicly traded Eutelsat owns 23% of privately held OneWeb already. In March, the companies unveiled a multiyear global arrangement for Paris-based Eutelsat to sell capacity on OneWeb’s low-Earth-orbit constellation to customers in aviation, marine, telecommunications, government and other markets.
“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,” Eutelsat said.
Under terms being discussed, shareholders of Eutelsat and OneWeb each would own an initial 50% of the combined entity. 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. The deal would be subject to approval by the requisite majority of Eutelsat shareholders and receipt of all relevant antitrust and regulatory (including foreign investment) approvals, among other conditions.
“There can be no assurance that these discussions will result in any agreement,” Eutelsat said. “Eutelsat will inform the market as soon as soon as there are any new developments.”
For OneWeb, such a deal would mark another dramatic turning point in the company’s survival. The UK government was one of two main shareholders who rescued the ailing satellite operator from Chapter 11 in summer 2020, along with India’s Bharti Global. Hughes Network Systems also invested soon after. OneWeb entered bankruptcy protection after Japan’s SoftBank withdrew its financial support following the financial impact of the COVID-19 pandemic.
SoftBank re-invested in OneWeb in January 2021 and has subsequently been joined by France’s Eutelsat and South Korea’s Hanwha. Together, the six partners have invested $2.7 billion, making OneWeb fully funded with no debt.
“The announcement adds a new dimension to the already chaotic LEO broadband landscape while also raising the table stakes for current and prospective LEO operators,” said Quilty Analytics analysts Chris Quilty and Caleb Henry.
Eutelsat’s interest for OneWeb had been known since it took the 23% stake, but the move for controlling interest was, according to Quilty Analytics, a “mild surprise” which would further shakeup an industry that includes SpaceX’s Starlink constellation and Amazon with its planned Project Kuiper. Any deal would take OneWeb out of play for other potential suitors, one of which was believed to be Intelsat.
Assuming the price is right and other market strategies are proven out, Quilty Analytics said the move makes sense as conventional wisdom increasingly believes that the most viable business model will include multi-orbit operations. But beyond challenges inherent in a young marketplace, a Eutelsat-OneWeb tie-up would face the historically daunting task of forcing official British-French collaboration.
“The book of successful Anglo-French partnerships is a short read, and the board will likely have its hands full sorting out a variety of details related to the merger, including the location of the headquarters, major operations, and the future manufacturing site for Gen-2 satellites,” Quilty and Henry wrote to clients July 25.
Bloomberg reported the weekend prior to the announcement that the deal would be worth $3 billion.
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