(Reuters) – French satellite operator Eutelsat on Monday confirmed talks with its British rival OneWeb over a possible merger between the two companies.
“Eutelsat Communications confirms that it has entered into discussions with its OneWeb co-shareholders with a view to a possible merger of the two companies through a share swap,” the group, which is OneWeb’s second-largest shareholder with a 23% stake, said on Monday.
Under the terms of the proposed deal, Eutelsat and OneWeb shareholders will each own 50% of the combined group’s shares to create a global communications leader, Eutelsat said in a statement.
The merger will strengthen Eutelsat and OneWeb in the race to develop low-orbit satellite constellations against competitors like Starlink, which depends on Elon Musk’s SpaceX, and Amazon’s Kuiper.
The French group also said the operation would be a “logical extension” of its partnership with OneWeb, which began with a stake in a UK competitor in April 2021, followed by a global distribution deal in March 2022.
OneWeb was valued at $3.4 billion (€3.33 billion) in its latest funding round, the source said.
Confirmation of the discussions, however, caused the group’s activity to plummet, and around 0808 GMT, the title, red light SBF 120, lost 17.5% on the Paris Stock Exchange to €8.59, its worst performance in over 6 years.
“At this point, we don’t have a business plan for this constellation, which is just getting started,” said Alexander Peterz, an analyst at Societe Generale, adding that it was difficult to comment on the valuation “until we have an idea about OneWeb’s finances.”
Credit Suisse analysts believe that, without debt financing, but also without turnover, OneWeb is likely to need Eutelsat’s money for investment.
The operation will no doubt require political agreement from the United Kingdom and the European Union, Credit Suisse added. The state bank Bpifrance is actually the largest shareholder of Eutelsat with 20% of the capital.
The British state, for its part, saved OneWeb from bankruptcy along with Indian businessman Sunil Bharti Mittal and, according to the source, thus became a minority shareholder of the new group.
(Report by Diana Mandia and Piotr Lipinski, edited by Kate Entringer)
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