Gilat Satellite Networks Buys Stellar Blu in $245M Deal to Enhance Airborne Connectivity

In a strategic move to capitalize on the growing demand for multi-orbit in-flight connectivity (IFC), Israel’s Gilat Satellite Networks has announced its plan to acquire Stellar Blu Solutions, a Texas-based aircraft equipment integration specialist.

The deal, valued at up to $245 million, aims to leverage emerging technologies to enhance Wi-Fi capabilities on airplanes. The acquisition has been approved by the boards of both companies but still requires several regulatory approvals, including from the foreign investment watchdog in the United States.

Gilat, primarily known for providing satellite broadband equipment on the ground, also offers modems for airplanes and ground stations for IFC providers. This acquisition is seen as a significant step in expanding its footprint in the aviation connectivity market.

Stellar Blu’s terminal platform, which features electronically steered array (ESA) technology developed by Ball Aerospace (now part of BAE Systems), is a key component of this expansion. The ESA technology enables aircraft to connect seamlessly to Ku-band satellites across geostationary and low Earth orbit (LEO).

Intelsat has been testing the ESA technology with Eutelsat OneWeb, aiming to integrate broadband services from both geostationary and LEO satellites for IFC. This service is expected to launch this year, catering to major airlines like American Airlines, Alaska Airlines, Air Canada, and Aerolineas Argentina. Similarly, Panasonic Avionics, a leading IFC provider, plans to use the ESA to blend OneWeb’s LEO connectivity with geostationary satellite capacity.

“We will have several sets of ESA antennas that the customers will be able to pick and choose,...In the longer term, we will focus … probably on one set of antennas.” He also indicated that the company plans to sell the ESA to non-airline customers, despite Stellar Blu not holding exclusive rights to the technology outside the aviation market. - Adi Sfadia, Gilat CEO

In addition to the multi-orbit ESA, Gilat is developing a LEO-only ESA for business and government clients. Nearly 200 of these antennas are set to be shipped to Florida-based IFC provider Satcom Direct next year.

Sfadia is optimistic about the market potential, predicting that the introduction of low-profile, multi-orbit ESAs with no moving parts could help create an IFC market valued between $700 million and $1 billion annually over the next decade.

Deal Financials and Future Projections

Under the deal terms, Gilat will pay Stellar Blu $98 million upon closing the transaction, expected by the end of this year. An additional $147 million will be paid over the next two years if the combined entity meets certain business and financial targets.

Stellar Blu has a backlog of nearly 800 terminals and is projected to achieve annual revenues between $100 million and $150 million starting in 2025. Despite recording a loss in EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2023 and anticipating another loss in 2024.

Gilat, a publicly traded company, reported $266 million in revenue for 2023, with a significant portion derived from the IFC segment.

This acquisition comes as competition intensifies among geostationary satellite operators to enhance their offerings with low-latency LEO services, particularly against SpaceX’s Starlink broadband constellation.