The battles between Eutelsat bosses to convince investors of the OneWeb deal

Eutelsat’s chief executive, Eva Berneke, on Tuesday fought to convince shareholders in the French satellite group of the merger case with British startup OneWeb, to admit that the merger marks a “major change” for a company that appreciates dividends.

Shares in Paris are listed Eutelsat has tumbled more than 30% since the group revealed on Monday that it was negotiating an all-inclusive deal with OneWeb, a satellite conglomerate backed by SoftBank and rescued from bankruptcy in 2016. 2020 by the British government and Indian telecom billionaire Sunil Bharti Mittal.

Announcing the deal on Tuesday, Eutelsat said it would pause its dividend for two years to invest in OneWeb’s low-Earth orbit satellite network. Billed as an amalgamation of equal companies, the tie-up is a step towards creating a European champion better positioned to compete with billionaire space entrepreneurs Elon. Musk and Jeff Bezos.

Eutelsat and OneWeb said in a joint statement that recommended deals will create a stronger player for providing space connectivity for everything from cruise ships to rural areas by combining Eutelsat’s fleet of 36 geostationary satellites with its constellation of 648 Earth-orbiting satellites. lowland (LEO) of OneWeb.

Berneke sought to appease Eutelsat’s worried investors, acknowledging that the deal was a major change to the company’s “stakes story,” which is based on being a money-generating business. stable face and reliable dividend payer.

“A lot of Eutelsat shareholders have been focused on profits and dividends and now we are creating a growth-oriented company that will need to invest in technology going forward,” she said. “This is a big change.”

Shares in Eutelsat fell 16% in Paris on Tuesday after falling 18% on Monday. Prior to this week, stocks were down just 3% this year, compared with a 13% drop for France’s Cac 40 index.

Markus Kaussen, an analyst at Swiss asset management firm BWM, a top 15 shareholder in Eutelsat, told the Financial Times on Monday that “operationally, I don’t see a reason for the merger and Financially, it’s just a bet on an expensive start-up.”

The major shareholders of both companies – the UK government and Bharti Global for OneWeb and the French government for Eutelsat – have announced their support and will be represented on a new 15-member board.

OneWeb shareholders will receive 230 million newly issued Eutelsat shares, representing 50% of the expanded share capital of the French group.

“We will be the only integrated GEO and LEO player in the world,” said Eutelsat President Dominique D’Hinnin. This will allow the new group to capitalize on “an impressive growth opportunity in our sector and outperform our competitors”.

The deal to assess the value of the privately held OneWeb, in which the UK bailout left the government with an 18% stake, at $3.4 billion, implies a value of 12 euros per Eutelsat shares, including the French corporation’s dividend for this year will be paid as planned.

A UK government official admitted that £100m of profits from the merger had been wiped out due to a sharp drop in Eutelsat’s share price, but pointed out that this was only “profit on paper”.

Business secretary Kwasi Kwarteng was “satisfied with the deal”, according to the official. “People say we’re going to lose £500m, that it’s an odd investment, that it’s a basket case,” he added. “This deal creates a single operation with financial influence in a competitive, consolidated market, which is a positive.”

Special shares allotted to the UK government allow ministers to veto sales of national security apps, keep OneWeb’s London headquarters, veto ties that could affect relations security Five Eyes and make the UK a “top priority” for both production and launch capabilities. “We consider this deal a no-brainer,” the official said.

Berneke will lead the combined company, while D’Hinnin will remain chairman; Mittal, president of OneWeb, will serve as vice president.

The deal highlights how European satellite companies, backed by governments that see space communications as a strategic industry, are racing to keep up with the likes of Musk and Bezos, who have poured money into groundbreaking satellite technology.

Musk’s company SpaceX has funded the development of his network of LEO Starlink satellites, which can provide internet connectivity with less latency because they are closer to earth. That posed a stiff challenge to OneWeb, which was once a pioneer in LEO, but whose fleet is now in need of a major upgrade.

Given the size of the investment required, Berneke told investors she can’t be sure when the dividend will be restored or to what extent.

While Eutelsat has no plans to raise equity to meet OneWeb’s investment needs, Berneke said she can’t rule it out because “it’s a bit hard to promise that I know everything about the future and what the technology will be like.” will do or not do”.

Eutelsat and OneWeb headquarters will be maintained in Paris and London respectively, and a listing for the consolidated group is also planned in the UK capital.

The companies said they expected the deal to close in six to nine months.

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