Advanced Television

SES raises cash to buy O3b

May 27, 2016

By Chris Forrester

Satellite operator SES is raising about €1 billion in order to complete its purchase of O3b (a ‘next generation’ satellite constellation serving the ‘other 3 billion’ unserved and underserved broadband users).

SES already owns 50.5 per cent, and has made no secret of its intentions to mop up the segment of O3b that it did not own. It will be buying out minority shareholders including Google, Liberty Global and HSBC amongst others.

SES will have to pay $710 million to buy the 49.5 per cent its does not own. SES’s logic is that O3b, which has only been operational for about a year, is well on its way to profitability and should achieve more than $100 million of revenues this trading year. The deal will close later this year.

Karim Michel Sabbagh, SES President/CEO, commented: “Taking 100 per cent control of O3b exceptionally strengthens the SES differentiation. O3b allows SES to expand its global reach and solutions, augments SES’s essential capabilities across the data-centric verticals and enhances SES’s foundations for sustainable growth.”

The move has been welcomed by the market, but at least one expressed the view of “Why now?” for the move. Giles Thorne, equity analyst at investment bank Jefferies, says: “We never doubted SES’s appetite to own 100 per cent of O3b, but we are left scratching our head as to why it’s made the move now given the financial logic of waiting and the protections afforded by the options. The upcoming [June 21 SES Capital Market Day meeting] will be critical in answering why issuing equity into the maelstrom of a vociferous debate around data price deflation was a good idea.”

Thorne was directly referring to the current sentiment on satellite stocks in general. While Eutelsat has been badly hit by market worries, it is also true that the whole industry has suffered these past two weeks from a severe downturn in the market.

Thorne amplified his concerns, saying: “Some may even be questioning that such a seemingly illogical move could presage further bad news. The message from the company is that the move to 100% control (and the commercial and financial synergies that comes with it) justifies the move. This could well be true – and the upcoming Capital Market Day on 21 June gives management the stage upon which to articulate this story. In the meantime, the market is likely to be worryingly scratching its head.”

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