Eutelsat lands on stock market, OneWeb merger rhymes with dilution, Company News

PARIS (Agefi-Dow Jones) — Satellite operator Eutelsat announced Monday that it has entered into talks with its co-shareholders in British broadband Internet service provider OneWeb, with a view to a possible merger between the two companies. carried out through the exchange of shares.

“There is no guarantee that these discussions will lead to an agreement,” warns in a press release from Eutelsat, which “will keep the market informed of any new developments over time.”

On the Paris Stock Exchange, the announcement sent Eutelsat’s stock down sharply, which posted the sharpest drop in the SBF 120 index on Monday, falling 15.8% to 8.78 euros. Indeed, the planned operation would be disadvantageous to the shareholders of the French satellite operator, which already owns 23% of OneWeb’s capital. The deal will be structured as a transfer by OneWeb shareholders of their stake in U.K.-based Eutelsat in exchange for newly issued shares in Eutelsat, according to the draft, which was unveiled 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’s shareholders will be diluted to own only half of the new company, whose economic model is unknown,” the London-based analyst, who says he is “very unable to build a valuation model for the future,” marvels. organization, given the limited information available at this stage.

“Political” file

While capable of presenting both risk and opportunity, the proposed merger of the two companies also has an “important political dimension,” notes Berenberg. To date, the French state is the majority shareholder in Eutelsat, in which it owns a 20% stake through Bpifrance, while the British government has held an 18% stake in OneWeb since it conducted a rescue pilot in 2020.

Upon completion of the merger, the French and British states should each own 10% of the capital of the new organization and benefit from a seat on its board of directors, said a source close to the Agefi-Dow Jones dossier. Eutelsat’s current CEO, Eva Bernecke, will take on the same role in the future company, 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 address the booming communications market, estimated at $16 billion by 2030.” The armed conflict in Ukraine has once again underlined the strategic nature of satellite communications, as evidenced by the recent support provided by the North American MDA and SpaceX groups to Kyiv’s military effort. With this in mind, the complementarity of Eutelsat, which has geostationary assets, and OneWeb, which specializes in low-orbit satellites, seems theoretically promising.

However, Romain Pierdon, an analyst at AlphaValue, warns that “getting OneWeb back to profitability will require significant investment and years of patience.” “The logic behind the deal appears to be to use Eutelsat’s robust cash generation to complement and enhance OneWeb’s investment plans that will deliver the necessary growth, albeit at the cost of capital intensity,” Societe Generale said.

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

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

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July 25, 2022 7:42 AM ET (11:42 GMT)