(Reuters) – French satellite operator Eutelsat on Monday confirmed discussions with its British competitor OneWeb, with a view to a possible merger of the two companies.
“Eutelsat Communications confirms that it has entered into discussions with its co-shareholders in OneWeb, with a view to a possible merger of the two companies by exchange of shares”, said Monday the group, which is the second largest shareholder of OneWeb with a stake of 23% equity.
Under the terms of the proposed transaction, shareholders of Eutelsat and OneWeb would each hold 50% of the shares of the combined group to create a global leader in connectivity, Eutelsat said in a statement.
This merger would strengthen Eutelsat and OneWeb in the race for the development of low-orbit satellite constellations against competitors such as Starlink, which depends on SpaceX, owned by Elon Musk, and Kuiper from Amazon.
The French group also said that the operation would represent “a logical follow-up” to its partnership with OneWeb, which began with a stake in its British rival in April 2021, followed by a global distribution agreement in March 2022.
OneWeb was valued at $3.4 billion (3.33 billion euros) in its latest funding round, a source said.
The confirmation of the discussions, however, caused the group’s action to plunge and around 08:08 GMT, the title, the red lantern of the SBF 120, lost 17.5% to 8.59 euros on the Paris Stock Exchange, its worst performance for more than 6 year.
“At the moment, we don’t have a business plan for this constellation which is just starting to work,” said Societe Generale analyst Aleksander Peterc, adding that it was difficult to comment on the valuation “until we have a idea of OneWeb’s finances”.
Credit Suisse analysts believe that, without debt financing but also without turnover, OneWeb probably needs Eutelsat’s cash to invest.
The operation will no doubt require a political agreement from the United Kingdom and the European Union, added Credit Suisse. The public bank Bpifrance is in fact Eutelsat’s largest shareholder with 20% of the capital.
The British state, for its part, saved OneWeb from bankruptcy with the Indian businessman Sunil Bharti Mittal, and would thus become a minority shareholder in the new group, according to a source.
(Report Diana Mandiá and Piotr Lipinski, edited by Kate Entringer)