French Eutelsat set to buy British satellite company OneWeb

The UK government is set to become a minority shareholder in a listed French company, as France’s Eutelsat nears a deal to acquire OneWeb, the space-based internet company saved from bankruptcy by Boris Johnson’s government.

According to those involved, a deal will be announced as early as Monday and will involve a takeover of OneWeb by Eutelsat, which already has a 24% stake in the UK-based company. Expecting intense political scrutiny, the deal will be presented publicly as a merger between equals.

The merger of the two companies will bring together the British, French and Chinese governments as well as Indian billionaire Sunil Bharti Mittal as common shareholders of one of the largest satellite operators in the world.

The French state holds a 20% stake and the Chinese sovereign wealth fund holds 5% of Eutelsat. The UK owns just under 18% of OneWeb. After the deal, shareholders on both sides will be diluted.

Eutelsat, listed in Paris, has a market value of 2.4 billion euros and has about 3 billion euros in net debt. In its last funding round, OneWeb was valued at $3.4 billion.

The deal values ​​the UK government’s stake in OneWeb at $600 million, two people with knowledge of the details said, or $100 million more than it originally invested in 2020. Mittal, which has a stake of 30% in OneWeb, will be one of the main shareholders of the combined group.

The UK will retain its special rights to OneWeb under the agreement. These rights include a right of veto over certain customers deemed undesirable for reasons of national security as well as a right of oversight over the supply chain and launch decisions. A UK official said Eutelsat would seek a secondary listing on the London market.

By merging with Eutelsat, OneWeb’s backers will gain support for the huge amount of funding still needed to deliver the company’s second-generation satellite network.

The greatest financial firepower will be needed in the competition with Elon Musk’s Starlink and Jeff Bezos’ Project Kuiper for low Earth orbit, the new frontier of commercial space.

OneWeb, which has 428 satellites in orbit, was a pioneer in this field but its current technology is recognized as outdated. Musk’s Starlink has more than 2,000 orbiting satellites with newer technology.

“The agreement recognizes that this is a highly competitive global race. This will allow the two companies to compete with SpaceX and emerging rivals from China as well. It’s a good story for Britain,” the official said.

Falling launch costs and cheaper satellites are attracting hundreds of private companies to a global space market estimated at $1 billion by 2040.

The UK’s initial investment in OneWeb in 2020 was highly controversial and championed by former Johnson adviser Dominic Cummings.

The government ignored the advice of senior officials when it decided to invest $500 million alongside $500 million from Bharti Global, part of the Mittal-controlled conglomerate, to bail the company out of bankruptcy. Chapter 11 in the United States.

OneWeb collapsed in 2020 after its main backer SoftBank refused to fund another round of funding, a sign of large cash financing needs needed to bring constellations in low Earth orbit to commercial operation. SoftBank still remains a significant shareholder of OneWeb.

Since its bankruptcy, the group has raised 2.7 billion dollars. Eutelsat paid $550 million for a 24% stake in OneWeb last year.

Rothschild is working with Eutelsat, while Barclays is advising OneWeb, people familiar with the deal said. Bloomberg previously reported on the deal.

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