News Operators Satellite

Eutelsat and OneWeb sign MoU to merge

There will be 15 directors on the combined board, including ten independent directors.

Eutelsat Communications and key OneWeb shareholders have signed a Memorandum of Understanding with the objective of creating a global player in connectivity through the combination of both companies in an all-share transaction.

Eutelsat will combine its 36-fleet of GEO satellites with OneWeb’s constellation of 648 Low Earth Orbit satellites, of which 428 are currently in orbit.

The transaction will be structured as an exchange of OneWeb shares by its shareholders (other than Eutelsat) with new shares issued by Eutelsat, such that, at closing, Eutelsat will own 100% of OneWeb (excluding the ‘Special Share’ of the UK Government). OneWeb shareholders will receive 230m newly issued Eutelsat shares representing 50% of the enlarged share capital.

The potential transaction builds on the deepening collaboration between Eutelsat and OneWeb, which began with the equity stake acquired by Eutelsat in OneWeb in April 2021, the global distribution agreement between Eutelsat and OneWeb announced in March 2022, and the new exclusive commercial partnership, addressing mainly the European and global cruise markets, signed today.

Commenting on the combination, Dominique D’Hinnin, Chairman of Eutelsat, said: “I am delighted to announce this new and significant step in the collaboration between Eutelsat and OneWeb. Bringing together our two businesses will deliver a global first, combining LEO constellations and GEO assets to seize the significant growth opportunity in connectivity, and deliver to our customer’s solutions to their needs across an even wider range of applications. This combination will accelerate the commercialisation of OneWeb’s fleet, while enhancing the attractiveness of Eutelsat’s growth profile. In addition, the combination carries significant value creation potential, anchored on a balanced mix of revenue, cost and capex synergies. The strong support of strategic shareholders of both parties is a testament to the huge opportunity that this combination offers and the value that will be created for all its stakeholders. This is truly a game changer for our industry.”

Sunil Bharti Mittal, Executive Chairman of OneWeb, added: “Having played a pioneering role in providing connectivity in the emerging world, I am excited about the possibilities of connecting the unconnected. The combination of Eutelsat and OneWeb represents a significant development in that direction as well as a unique GEO/LEO combination. The positive early results of our service together with our strong pipeline represent a very exciting opportunity in the fast-growing satellite connectivity segment, especially for customers requiring a high speed, low latency experience. Our customers are actively seeking a combined GEO/LEO offering leading us towards this important step. Bharti, as the lead shareholder of OneWeb, along with other key shareholders, is looking forward to playing a meaningful role in providing expanded connectivity through the combination of OneWeb and Eutelsat.”

Eva Berneke, Chief Executive Officer of Eutelsat, stated: “Our initial investment in OneWeb was underpinned by our strong belief that the future growth in connectivity will be driven by both GEO and LEO capacity. This belief has intensified as our relationship with OneWeb has deepened, first by raising our stake in the company, and then with the global distribution agreement signed a few months ago. We are now moving to the next level, with a full combination that will ensure the potential of the GEO/LEO integration is fully realised, supported by compelling financial, strategic, and industrial logic. This ground-breaking combination will create a powerful global player with the financial strength and technical expertise to accelerate both OneWeb’s commercial deployment, and Eutelsat’s pivot to connectivity. The combined entity will be geared towards profitable growth, with strong medium-term cash flow generation and a rapid deleveraging driven by strong forecast EBITDA growth. The benefits for our customers and strategic partners, who are at the centre of our strategy, are both significant and unique. This is also a very exciting opportunity for our employees who will be key to the success of this transformation.”

Neil Masterson, Chief Executive Officer of OneWeb, commented: “Just 20 months ago, OneWeb resumed its mission to connect the unconnected and remove the barriers to connectivity that hold back many of the world’s underserved economies and communities. Since then, we have turned this vision into reality and become the second largest low Earth orbit satellite operator in the world. Today’s announcement is another bold step in OneWeb’s remarkable journey. It is a testament to the resilience, execution and innovation of our teams, the strong demand we have seen since launching our commercial services, and the close collaboration we have forged with our partners to provide high-speed, low latency connectivity for governments, businesses, and communities. This combination accelerates our mission to deliver the connectivity that will change lives at scale and create a fast-growing, well-funded company which will continue to create significant value for our shareholders.”

Eutelsat and OneWeb will address the considerable connectivity market opportunity, which is fueled by the growing needs of customers in both the B2B and B2C segments for consistent, reliable connectivity. These market segments are forecast to grow by three and five times respectively over the next decade, to reach a combined value of circa $16bn by 2030, with growth being served by both GEO HTS and LEO capacity according to a report by Euroconsult.

The transaction provides a platform for both entities to create value while transforming their respective growth profiles and cash generation potential.

The combined entity will have revenues of circa €1.2bn and EBITDA of circa €0.7bn in FY22-23. Revenues are forecast to grow at low double-digit CAGR over the next decade.

The transaction will be structured as an exchange of OneWeb shares for newly issued Eutelsat shares. This excludes the ‘Special Share’ in OneWeb which is retained by the UK Government together with the existing rights associated therewith. OneWeb shareholders will receive 230m newly issued Eutelsat shares, representing 50% of Eutelsat’s enlarged share capital.

The number of new Eutelsat shares to be received by existing OneWeb shareholders will not be affected by the payment of the €0.93 per share dividend with a scrip option for FY 21-22 to be proposed at the upcoming AGM of Eutelsat.

Trading under its existing name, OneWeb will continue to operate the LEO business, with OneWeb’s headquarters remaining in the UK.

Eutelsat will continue to be headquartered and domiciled in France, listed on Euronext Paris and will apply for admission to the standard segment of the UK Official List of the UK Financial Conduct Authority and to trading on the London Stock Exchange (subject to meeting the applicable eligibility requirements and the approval of the UK Financial Conduct Authority).

The combined entity will have a balanced ownership structure with a substantial free float alongside anchor public shareholders and supportive private investors.

The Board of Directors of the combined group will consist of 15 members including ten independent directors. Seven directors, in addition to the CEO of Eutelsat, will be proposed by Eutelsat and its key shareholders and seven directors will be proposed by OneWeb and its key shareholders (the number of directors proposed by each of the key Eutelsat and OneWeb shareholders being commensurate to their shareholding in Eutelsat post transaction).