(Update: Intelsat reaction to Financial Times information)
By Dmitri Delmond
PARIS (Agefi-Dow Jones)–SES falls on the stock market on Thursday, investors questioning the strategy of the Luxembourg satellite operator in terms of mergers and acquisitions and ignoring the publication of results slightly better than expected analysts for the second quarter.
At 2:25 p.m., the title dropped 8.6% to 7.09 euros, thus showing the largest drop in the SBF 120 index.
According to the Financial Times, which cites several sources familiar with the matter, SES and its American competitor Intelsat have initiated discussions with a view to a potential merger. Such a coupling would give birth to an actor achieving a turnover of 4 billion dollars, or approximately 3.9 billion euros, per year.
Contacted by the Agefi-Dow Jones agency, an Intelsat spokesperson declined to comment on this information. Nevertheless, the company “intends to play a leading role” in the ongoing transformation of its industry, he said. “We believe that partnerships between satellite communications companies and the bundling of complementary capabilities can drive competition, which benefits customers and people around the world who rely on seamless connectivity,” the representative added. Intelsat.
In a conference with reporters, Steve Collar, chief executive of SES, declined to comment on the speculation. In the past, the leader “has repeatedly asserted that further consolidation would be beneficial to the industry, particularly ‘horizontal’ (rather than ‘vertical’) mergers, such as would be the case if SES were to merge with Intelsat.” , observes Berenberg.
Discussions between SES and Intelsat would be legitimate as the satellite telecommunications sector accelerates its transformation thanks to the emergence of new players, such as Starlink (SpaceX) and Kuiper (Amazon), and through intense consolidation. After the announcement of the acquisition of the British company Inmarsat by the American group Viasat in November 2021, the French operator Eutelsat revealed last week its plan to take over another British player: OneWeb.
Many worries
“In light of recent announcements regarding Eutelsat and OneWeb”, the opening of discussions between SES and Intelsat with a view to a combination “would be a logical step”, but “would raise concerns about the risk of execution and leverage,” warns Citi. The American company came out of bankruptcy protection in the United States at the beginning of the year with a net debt of 7 billion dollars. As of June 30, 2022, SES’s adjusted net debt stood at €3.31 billion.
“The risk of a complicated transaction is clearly present in the minds of investors”, supports Societe Generale. The union between SES and Intelsat could displease the competition authorities, while the two companies each hold a share of around 20% of the world market for fixed telecommunications services by satellite. Such a marriage should also receive the blessing of the Luxembourg State, which controls 33.3% of the capital of SES and which would probably seek to retain a strong influence on the merged structure.
In this context, the market prefers to ignore for the moment the synergies that could emerge from the entity resulting from a potential merger between SES and Intelsat. The two companies offer similar products at the same time as they rather evolve in the same geographical areas, notes Deutsche Bank. The investment bank also regrets that investors are ignoring SES’s recent financial performance and confirmation of its flight plan for this year.
In the second quarter, the Luxembourg group achieved a turnover of 451 million euros, down 2.7% over one year in organic data, but 1.3% higher than analysts’ forecasts, according to JPMorgan. Its adjusted gross operating surplus (Ebitda) stood at 271 million euros over the period, exceeding consensus expectations by 3%. For the current financial year, SES still expects revenue of between €1.75 billion and €1.81 billion, as well as an adjusted Ebitda of between €1.03 billion and €1.07 billion. .
-Dimitri Delmond, Agefi-Dow Jones; +33 (0)1 41 27 47 31; [email protected] ed: VLV
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August 04, 2022 09:21 ET (13:21 GMT)