Eutelsat Communications is discussing a merger with the low-altitude internet constellation. Questions about valuation weigh heavily and the title plunges on the stock market.
A planned merger between Eutelsat and OneWeb which goes badly on the stock market | Photo credits: © Eutelsat
Eutelsat confirmed on Monday ” have entered into discussions with its co-shareholders in OneWeb, with a view to a possible merger of the two companies by exchange of shares. This combination would create a world leader in the field of connectivity with GEO activities [orbite géostationnaire]/LEO [orbite basse] complementary “, information made public by the Reuters agency.
The least we can say is that the project does not excite the market. On the stock market, the action plunged by nearly 20% at most in the session. For Eutelsat, “the combined entity would be the first multi-orbit satellite operator offering integrated GEO/LEO solutions and would be uniquely positioned to address the booming connectivity market, estimated at $16 billion by 2030. OneWeb, one of only two global LEO networks, whose service is due to be fully deployed in 2023, has seen strong momentum in recent months “. It would also be a logical sequence “, Estimates the group, which invited itself in April 2021 to the capital of the company – exit from a safeguard procedure in November 2020 – behind the first shareholder, the Indian telecoms group Bharti and in front of the British government. He now owns 23%.
1 billion dollars per year… after 2023
This investment, which represented 715 million dollars and earned the company the “Strategic Transaction of the Year” award at World Satellite Business Week, was appreciated by investors because it allowed the satellite operator to position itself intelligently on the very high-speed Internet market thanks to the constellation of which more than 300 satellites have already been deployed in low orbit. What to strengthen the activity and especially to restore growth to the group which suffers on its traditional video and data activities and has revised its forecasts several times. OneWeb is aiming for $1 billion in revenue per year after its full deployment after 2023. This is also what would have motivated Patrick Drahi at the end of 2021 to make an offer for Eutelsat.
But when the situation already seemed promising for Eutelsat, why go further? The first comments seem to imply that the planned parity valuation (50% for Eutelsat shareholders and 50% for Oneweb in the new entity) would be largely unfavorable to the French operator. ” The transaction would be structured as a contribution, by the shareholders of OneWeb, of their stake in OneWeb to Eutelsat, in exchange for newly issued Eutelsat shares. “, specified the company.
And if OneWeb seems to offer a great opportunity for the future, it does not realize, for the moment, turnover while the operation, if it proves, would weigh on Eutelsat’s cash and would be very dilutive for shareholders.