Eutelsat goes public, merger with OneWeb rhymes with dilution, Company news

PARIS (Agefi-Dow Jones) – Satellite operator Eutelsat announced on Monday that it has opened talks with its co-shareholders in British broadband provider OneWeb for a possible merger between the two companies. is implemented through the exchange of shares.

“There are no guarantees that these discussions will lead to an agreement,” Eutelsat warned in a press release, which “will keep the market informed of any new developments in a timely manner.”

On the Paris stock exchange, the announcement led to a sharp drop in Eutelsat shares, which were the biggest losers in the SBF 120 index on Monday, falling 15.8% to 8.78 euros. Indeed, the planned operation would be disadvantageous for the shareholders of the French satellite operator, which already owns 23% of OneWeb’s capital. The deal will be structured as a contribution by OneWeb shareholders of their stake in UK company Eutelsat in exchange for newly issued Eutelsat shares, according to the draft presented on Monday. After the operation, the shareholders of Eutelsat and OneWeb will each own 50% of the shares of the combined company.

“This means that Eutelsat shareholders will be diluted to own only half of the new company, whose economic model is unknown,” wonders the London-based analyst, who says he is “very unable to build a valuation model for the future.” given the limited information available at this stage.”

“Political” file

According to Berenberg, the proposed merger of the two companies could represent not only a risk, but also an opportunity. Today, the French state is Eutelsat’s main shareholder, in which it owns 20% through Bpifrance, while the British government owns 18% of OneWeb since its pilot bailout in 2020.

At the end of the merger, France and Britain will each own 10% of the capital of the new organization and will have a seat on the board of directors, a source close to the Agefi-Dow Jones agency file said. Current Eutelsat CEO Eva Bernecke will take on the same functions as part of the future entity, which will be listed on the Paris and London stock exchanges, the source added.

According to Eutelsat, “the combined company will be the first multi-orbit satellite operator and will be uniquely positioned to serve the booming communications market, which is estimated to be worth $16 billion by 2030.” The armed conflict in Ukraine has further emphasized the strategic nature of satellite communication, as evidenced by the recent support of Kyiv’s military efforts by the North American groups MDA and SpaceX. Given this, the complementarity between Eutelsat, which has geostationary assets, and OneWeb, which specializes in low-orbit satellites, looks promising in theory.

Romain Pierredon, an analyst at AlphaValue, however, warns that “returning OneWeb to profitability will require heavy investment and several years of patience.” “The logic of the transaction appears to be to use Eutelsat’s solid cash accumulation to complement and enhance OneWeb’s investment plans, which will provide the necessary growth, albeit at the cost of capital intensity,” Societe Generale maintains.

Berenberg estimated that Eutelsat should post on August 3 a net profit of 276 million euros for the 2021-2022 fiscal year that ended at the end of last June, after deducting OneWeb’s estimated share of losses of up to 45 million euros.

-Dimitri Delmond, Agefi-Dow Jones; +33 (0)1 41 27 47 31; [email protected] editor: VLV

Agefi-Dow Jones Financial news feed

Dow Jones Newswires

July 25, 2022 07:42 ET (11:42 GMT)