Intelsat scrubs SES merger talks
June 22, 2023
By Chris Forrester
The merger discussions between the world’s two largest satellite operators, SES and Intelsat, are over. Intelsat said a deal, valued at a potential $10 billion (€9.1bn), is now off the table.
SES announced June 22nd that discussions regarding a possible combination with Intelsat have ceased. On March 29th, SES had confirmed that the company had engaged in discussions with Intelsat and that there could be no certainty that a transaction would materialise.
“Intelsat engages in strategic conversations with potential partners on a regular basis, and we do not publicly comment on the content or outcome of those discussions. The Intelsat team has orchestrated a remarkable business turnaround over the past year-plus, and we are well positioned as a market and strategy leader in the satellite communications industry. We are focused on providing solutions and customer service that are second to none, on delivering robust value to investors, and on ensuring Intelsat is a great place for our people to make a career,” stated Intelsat in a public comment to the industry.
The pair had been in discussions for at least three months.
The ending of the discussions could be a major clue to SES CEO Steve Collar’s departure – after 20 years at SES – which he announced on June 12th. Collar had regularly talked about the need for mergers in the satellite industry, and had enthusiastically backed this particular set of discussions.
A second clue to the ending of negotiations was the report that Intelsat was looking at adding 16 satellites mid-Earth orbiting (MEO) satellites to its fleet. A merger with SES – which already has a suitable fleet of MEOs – would make an Intelsat order unnecessary.
Industry observer Tim Farrar (of TMF Associates) said that the quote about “SES-aligned parties would not agree to certain business fundamentals important to Intelsat stakeholders” is the most significant: could this be referring to the Luxembourg government being unwilling to allow a merger of equals?
That ‘merger of equals’ is because the Luxembourg state has significant shareholdings in SES. Farrar adds that the Luxembourg holdings, plus the new satellite additions help explain the ending of the discussions.
On the other side of the coin, the major shareholder in the (non-public) Intelsat rests with Germany insurance giant Allianz.
Also, an inevitable part of the discussions must be the depressed state of SES shares. In March, when the discussions were in full flow the SES share price was around €6.30 a share. They have since lost a large proportion of that value and are now (June 21) at €4.86. Indeed, over the past six months, their share price has crashed an overall 21 per cent.
Consequently, the amount of negotiating room available to Steve Collar and his team might have been increasingly challenging.
And separately, SES is still awaiting a Delaware Appeal Court ruling on an action it has running against Intelsat over C-band proceeds.