SES to Acquire Intelsat for $3.1 Billion

In a move set to reshape the landscape of the satellite communication industry, SES is acquiring its rival operator, Intelsat, for $3.1 billion.

The deal, announced on April 30, signifies a strategic maneuver to consolidate two of the major players in the Geostationary Earth Orbit (GEO) satellite market, which is grappling with intensified competition from Low Earth Orbit (LEO) constellations. The agreement, contingent on regulatory approvals, outlines that SES will pay $3.1 billion in cash, coupled with certain contingent value rights, to secure complete ownership of Intelsat. However, the transaction isn't anticipated to be finalized until the latter half of 2025.

CEO of SES, Adel Al-Saleh, elucidated that the acquisition will be funded primarily through SES's existing cash reserves, estimated to be around $2.6 billion as of March-end, supplemented by debt financing. The merged entity is projected to amass approximately $4.1 billion in annual revenues, with an estimated adjusted EBITDA of $1.9 billion for the current fiscal year.

While the headquarters will remain stationed in Luxembourg, SES's base, the company assures a significant operational presence will be maintained in Intelsat's domicile in the Washington, D.C., area.

"In a fast-moving and competitive satellite communication industry, this transaction expands our multi-orbit space network, spectrum portfolio, ground infrastructure around the world, go-to-market capabilities, managed service solutions, and financial profile." - Adel Al-Saleh, CEO of SES

"By combining our financial strength and world-class team with that of SES, we create a more competitive, growth-oriented solutions provider in an industry going through disruptive change." - David Wajsgras, CEO of Intelsat

The consolidation brings together two of the largest operators of commercial GEO communications satellites, a sector that has faced mounting pressure due to diminished demand from conventional television services and the ascendancy of LEO constellations like SpaceX’s Starlink, which offer advanced connectivity solutions.

Currently, the combined companies boast more than 100 GEO satellites, alongside the medium Earth orbit O3b constellation from SES. Additionally, the two entities have a total of 13 satellites on order, including both GEO and O3b mPOWER satellites, with expectations of capital expenditure savings, particularly in future non-GEO satellite systems.

The deal comes amidst a broader trend of consolidation within the satellite communications sector, exemplified by recent acquisitions such as Viasat’s acquisition of Inmarsat and Eutelsat’s acquisition of OneWeb. Rumors of a potential merger between SES and Intelsat had been circulating for years, with SES confirming talks in March 2023. However, negotiations fell through three months later due to unresolved differences.

Al-Saleh, shedding light on the current deal, emphasized that negotiations were already underway upon his assumption of the CEO position at SES. He asserted that this particular transaction presented the most compelling proposition among various merger and acquisition opportunities being considered by SES.

Addressing concerns over potential antitrust implications, Al-Saleh asserted confidence that the acquisition would not raise significant issues, especially in the United States, given the companies' extensive services to the U.S. military. He reasoned that the government spend would be distributed among numerous players, mitigating any overarching market dominance.

As the satellite communication industry braces for transformative changes, the SES-Intelsat merger emerges as a pivotal development, promising enhanced capabilities, strengthened market presence, and heightened competitiveness in an evolving landscape.