All-Share Transaction Will Combine OneWeb, Eutelsat
Eutelsat Communications and key OneWeb shareholders have signed a Memorandum of Understanding with the objective of creating a leading global player in connectivity through the combination of both companies in an all-share transaction. Eutelsat will combine its 36-strong fleet of GEO satellites with OneWeb’s constellation of 648 low Earth orbit satellites, of which 428 are currently in orbit.
"This combination will accelerate the commercialization of OneWeb’s fleet, while enhancing the attractiveness of Eutelsat’s growth profile. In addition, the combination carries significant value creation potential, anchored on a balanced mix of revenue, cost and capex synergies."
Dominique D’Hinnin, Eutelsat’s Chairman.
The transaction would be structured as an exchange of OneWeb shares by its shareholders (other than Eutelsat) with new shares issued by Eutelsat, such that, at closing, Eutelsat would own 100% of OneWeb (excluding the ‘Special Share’ of the UK Government). OneWeb shareholders would receive 230 million newly issued Eutelsat shares representing 50% of the enlarged share capital.
The potential transaction builds on the deepening collaboration between Eutelsat and OneWeb, begun with the equity stake acquired by Eutelsat in OneWeb in April 2021, the global distribution agreement between Eutelsat and OneWeb announced in March 2022, and the new exclusive commercial partnership , addressing mainly the European and global cruise markets, signed today.
"I am delighted to announce this new and significant step in the collaboration between Eutelsat and OneWeb. Bringing together our two businesses will deliver a global first, combining LEO constellations and GEO assets to seize the significant growth opportunity in connectivity, and deliver to our customers solutions to their needs across an even wider range of applications," said Dominique D’Hinnin, Eutelsat’s Chairman. "This combination will accelerate the commercialization of OneWeb’s fleet, while enhancing the attractiveness of Eutelsat’s growth profile. In addition, the combination carries significant value creation potential, anchored on a balanced mix of revenue, cost and capex synergies. The strong support of strategic shareholders of both parties is a testament to the huge opportunity that this combination offers and the value that will be created for all its stakeholders. This is truly a game changer for our industry.”
"Just 20 months ago, OneWeb resumed its mission to connect the unconnected and remove the barriers to connectivity that hold back many of the world’s underserved economies and communities. Since then, we have turned this vision into reality and become the second largest low Earth orbit satellite operator in the world," said Neil Masterson, OneWeb’s Chief Executive Officer. "[This] announcement is another bold step in OneWeb’s remarkable journey. It is testament to the resilience, execution and innovation of our teams, the strong demand we have seen since launching our commercial services, and the close collaboration we have forged with our partners to provide high-speed, low latency connectivity for governments, businesses, and communities. This combination accelerates our mission to deliver connectivity that will change lives at scale and create a fast growing, well-funded company which will continue to create significant value for our shareholders.”
Through this all-share transaction, Eutelsat and OneWeb will address the considerable Connectivity market opportunity, which is fuelled by the growing needs of customers in both the B2B and B2C segments for consistent, reliable connectivity. These market segments are forecast to grow by three and five times respectively over the next decade, to reach a combined value of circa $16 billion (≈$1.62 billion) by 2030, with growth being served by both GEO HTS and LEO capacity.
Moreover, the combination of the network density, compelling economics and high throughput of GEO with the low latency and ubiquity of LEO, creates the optimal solution to address an even wider range of customer needs, thereby expanding the addressable market.
The combination of Eutelsat with OneWeb is forecast to generate substantial value:
Average annual revenue synergies are estimated at circa €150 million (≈$151.76) after four years, with hybrid GEO/LEO offerings providing a premium service to customers as well as improving the fill rate.
Synergies from joining organizational forces are expected to generate annual run-rate savings of over €80 million (≈$81 million) pre-tax after five years, mostly through cost duplication avoidance.
Capex optimization is expected to generate average savings estimated at circa €80 million (≈$81 million) per annum, from year one. This would be achieved by leveraging the hybrid GEO/LEO satellite infrastructure and through the improved purchasing power of the combined entity.
These sources of incremental value creation represent a balanced split between revenues, costs and capex. Taken together they equate to a net present value of over €1.5 billion (≈$1.52 billion) after tax (net of implementation costs).
The all-share transaction provides a platform for both entities to create value while transforming their respective growth profiles and cash generation potential. The combined entity would have revenues of circa €1.2 billion (≈$1.21 billion) and EBITDA of circa €0.7 billion (≈$0.71 billion) in FY22-23, and revenues are forecast to grow at low double-digit CAGR over the next decade.
(Source: Eutelsat news release. Image from file)