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SES: “O3b could generate a CAGR of 30%”

At the end of April, SES CEO Karim Michel Sabbagh said that the satellite operator would increase its stake in satellite constellation O3b standing for the ‘other 3 billion’ from 49.1 per cent to 50.5 per cent.

Sabbagh also made it clear that his end-game is to – one way or another – take full control of O3b and to consolidate within the SES family of businesses.

There are, however, a few hurdles to overcome not least persuading O3b’s other shareholders to sell their holdings. Given that these players include Google, Liberty, Allen & Co and HSBC, due consideration must be given to their positions which include various built-in options for SES and the now minority shareholders.

Sarah Simon, equity analyst at investment bankers Berenberg, believes the 100 percent ownership will not wrap until 2017, although the core deal has been “cleverly structured” in her May 12th “Onward and Upward” note to investors. She adds that the deal will deliver a variety of synergies, and that “SES paid a pretty low price given the growth potential of O3b”.

SES is on record as saying that it believes that O3b’s revenues could rise to €400-€450 million by 2021. This year’s revenues will be about €90 million (only Year 2 of O3b’s operations) and the bank’s note says: “this implies a compound annual growth rate of over 30 per cent. We expect O3b to post a small positive EBITDA this year, and for a margin in the low 70s per cent to be achievable by 2021, suggesting a five-year EBITDA CAGR of 84 per cent”.

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