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Eutelsat bid “raises all boats”

October 1, 2021

Eutelsat shareholders had a prosperous day on September 30th when the company’s share price rose dramatically by an initial 15.6 per cent (to €11.97), just below Patrick Drahi’s reported €12 bid.

Eutelsat confirmed receipt of the bid, and rejected the approach. This suggests either Drahi doesn’t have the backing of state-backed BPI or else – naturally – Eutelsat wants more cash on the table.

For shareholders this is a dilemma. They will receive their annual dividends from Eutelsat in November (currently at €0.93 and above 2020’s €0.89) and a solid return that is well covered by revenues and likely to continue. In other words, Drahi might be expected to place more cash on the table to tempt institutional investors to take up any final offer.

Indeed, investment bank Exane/BNPP, in a note to clients, said: “It might simply be that shares are near all-time lows and he sees value (we see ETL as under significant structural pressure). Given the nature of the potential acquirer we believe that the French government could be amenable to such a deal.”

However, set against this pretty picture is the fact that back in October 2019 Eutelsat shares cost €18. In October 2018 they were valued at €22. In September 2017 they were a thumping €24 per share.

Longer-term investors might want to see these levels achieved again and they must ask themselves whether this prospect can happen under Eutelsat’s current management or would Drahi make a better manager? Of course, the larger question is whether Eutelsat will stay as a public company.

SES also performed well on September 30th. Its share price rose more than 4 per cent in early trading (to €7.67) which suggests that other investors are looking at the asset. But, as with Eutelsat, a price of €7.67 is still miserable when looked at historically. As recently as November 2020 shares were trading at €8.29. In October 2019 they were at €17.50, and in May 2017 were at almost €22 a share. And back in March 2015 they were at €34.

Both Eutelsat and SES have a long way to go to recover those dizzy heights.

Analysts at Credit Suisse wrote that the presence of the French state’s shareholding in Eutelsat, via BPIfrance, could be the main hurdle to a deal going through, given how satellites are a strategically important asset for France.

“Let’s not forget the French state gave Eutelsat a very sizeable tax break two years ago so how do you justify to the taxpayer/voter it is okay to now let a Swiss-based oligarch to pocket this tax break?,” quipped an analyst talking to Reuters.

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