OneWeb, which emerged from bankruptcy in 2020, hopes the merger with Eutelsat will help change its fortunes.
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As a result of the merger of all shares, Eutelsat will issue 230 million new shares and exchange them for all remaining OneWeb shares. Press release Tuesday.
Shareholders of OneWeb and Eutelsat will own 50% of the combined company, respectively. The deal values OneWeb at $3.4 billion.
Once merged, the combined company is expected to generate around €1.2 billion ($1.22 billion) in revenue in fiscal year 2022-23, the companies said.
Eutelsat’s Dominique D’Ennin and Eva Bernecke will continue to serve as chairman and CEO of the combined company, with OneWeb supporter Sunil Bharti Mittal as co-chairman.
D’Hinnin, chairman of Eutelsat, said the deal will help the companies “seize significant growth opportunities in connectivity.”
“This combination will accelerate the commercialization of the OneWeb fleet and increase the attractiveness of Eutelsat’s growth profile,” he added.
OneWeb wants to host 648 low-orbit satellites to help deliver broadband to rural areas with limited internet access. There are currently 428 satellites in orbit, which will now be combined with Eutelsat’s fleet of 36 geostationary satellites.
OneWeb, long touted as a competitor to SpaceX’s huge satellite Internet project Starlink, and Amazons own Project Kuiper, has struggled to turn its lofty ambitions into a viable business model.
The company emerged from bankruptcy in 2020 with the help of the UK government, burning through billions of dollars in venture capital. The government provided $500 million as part of a relief package for the firm.
The startup was also affected by the freezing of rocket launches from Russia after Moscow’s invasion of Ukraine. forced to turn to SpaceX for support.
OneWeb is hopeful that joining Eutelsat will help change its fortunes, with CEO Neil Masterson calling it “another bold step” in helping the company achieve its mission.
“This combination accelerates our mission to deliver life-changing connectivity at scale and create a fast-growing, well-funded company that will continue to create significant value for our shareholders,” Masterson said.
Investors were not convinced by the takeover on Tuesday, with Eutelsat shares trading at their lowest level since the end of 2020. Eutelsat said it will temporarily suspend its dividend to focus on deploying the OneWeb satellite constellation.
The deal is subject to various regulatory approvals, including the UK’s rigorous national security review process. It is expected to be completed by the first half of 2023.
The deal excludes a “special stake” held by the UK government, which gives it a say in national security issues, including OneWeb’s network security standards and its headquarters location.
London is loosening its hold on the once-space enterprise at a difficult political time. Members of the ruling Conservative Party must determine who will be the next leader of the UK after the resignation of Prime Minister Boris Johnson.
Tory supporters certainly need a prime minister who can protect precious British assets from foreign takeovers, especially from the EU, after Brexit.
The issue of foreign acquisitions has become particularly acute in the context of NvidiaX unsuccessful attempt take on British chip designer Arm and sale of semiconductor firm Newport Wafer Fab to a Chinese company.
Under the terms of the agreement, OneWeb will continue to trade under its existing name and retain its UK headquarters. Eutelsat, which is listed in Paris, is planning an additional listing on the London Stock Exchange.
But the deal will also see the government join a special list of Eutelsat shareholders, including the Chinese state. This may come as a surprise to Britain’s closest allies, not least the US.
Eutelsat already acquired a stake in OneWeb last year in a post-financial funding round. Other OneWeb backers include Indian tycoon Sunil Bharti Mittal and a Japanese tech investor. SoftBank.