Advanced Television

Bank approves SES’s DRS acquisition

March 24, 2022

On March 21st satellite operator SES announced it was buying governmental solutions business DRS Global Enterprise Solutions (GES), a US subsidiary of Italian Leonardo DRS. The $450 million (€408.8m) move has been analysed by investment bank Exane/BNPP which believes there is a “strong strategic rationale” behind the acquisition.

Leonardo Chief Executive Alessandro Profumo said the sale is part of his company’s multi-year plan to focus on core businesses and to deliver on its promise financial guidance for 2022.

J.P. Hemingway, SES’s chief strategy and product officer, said: “We are under-represented [in GES’s business] given that we are the world’s largest satellite provider […] To have 10 per cent means we are under-represented in their overall architecture. There is certainly room to shift that balance and move higher up in terms of the best use of the best assets.”

The bank amplifies that comments, saying it sees more spending from US and European governments (and by implication their military) “especially in the current geopolitical context in Eastern Europe. This is likely to continue to drive good growth for SES Government, now 26 per cent of group 2022 (estimated) pro-forma revenue. SES recently guided that Government services could account for 30-50 per cent of mPower future revenues.”

mPower is the existing SES mid-Earth orbiting fleet and which will more than double the overall capacity with the launch of extra satellites during this year and 2023. The satellites are already supplying broadband connectivity to 5 of of the top 6 cruise lines.

The new acquisition will bring with it contracts with the US Special Operations Command, the US Indo Pacific Command and Alaskan healthcare provider communications, for instance. GES supports over 10,000 (of the c17,000) remote satellite terminals in use.

Also, there’s a helpful saving of some $25 million in cost savings. The bank says that one of the likely changes is that SES could migrate GES third-party capacity spending onto its own satellite system. Assuming $15 million of pull-through savings is equivalent to less than 20 per cent of total third-party spending. This suggests that Intelsat and other satellite operators will lose out as a result of the acquisition.

The deal is expected to close by October 1st.

Categories: Blogs, Business, Inside Satellite, M&A

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