Advanced Television

SES to acquire Intelsat; solid Q1

April 30, 2024

By Chris Forrester

In a surprise announcement, SES has announced it is buying rival Intelsat with a cash payment of $3.1 billion (€2.9bn).

In a press statement, SES said: “The combination will create a stronger multi-orbit operator with greater coverage, improved resiliency, expanded suite of solutions, enhanced resources to profitably invest in innovation, and benefit from the collective talent, expertise, and track record of both companies. The combination will deliver greater value for customers and partners, as well as providing a compelling alternative in the new era of growth, innovation, and competition for the satellite communications industry.”

The deal is not expected to clear regulatory hurdles much before H2 2025, and could well face anti-trust challenges in the US.

“The transaction has been unanimously approved by the Board of Directors of both companies and Intelsat shareholders holding approximately 73 per cent of the common shares have entered into customary support agreements requiring them to vote in favour of the transaction,” added SES.

Transaction highlights

• Delivers €2.4 billion of synergies (85 per cent of equity consideration) with 70 percent executed within 3 years after closing.

• Expands multi-orbit satellite-based capabilities, spectrum portfolio, and global ground network to serve customers.

• Increases revenue in high demand and growing Networks segments representing ~60 per cent of expanded revenue base.

• Combines complementary investment in space, ground, and network innovation to unlock future value and opportunity.

• Brings together a wealth of collective talent, expertise, engineering knowledge, and go-to-market capabilities.

• [The new] company will benefit from gross backlog of €9 billion, revenue of €3.8 billion, and Adjusted EBITDA of €1.8 billion.

• Medium-term Adjusted EBITDA growth driving future free cash flow (FCF) generation outlook.

• Commitment to investment grade metrics with net leverage below 3 times within 12-18 months after closing.

• Commitment to annual dividend of €0.50 per A-share with expanded FCF base supporting potential for future increases.

Adel Al-Saleh, CEO of SES, commented: “This important, transformational agreement strengthens our business, enhances our ability to deliver world-class customer solutions, and generates significant value for our shareholders in a value accretive acquisition which is underpinned by sizeable and readily executable synergies. In a fast-moving and competitive satellite communication industry, this transaction expands our multi-orbit space network, spectrum portfolio, ground infrastructure around the world, go-to-market capabilities, managed service solutions, and financial profile. I am excited by the opportunity to bring together our two companies and augment SES’s own knowledge base with the added experience, expertise, and customer focus of the Intelsat colleagues.”

“Going forward, customers will benefit from a more competitive portfolio of solutions with end-to-end offerings in valuable Government and Mobility segments, combined with value-added, efficient, and reliable offerings for Fixed Data and Media customers. This combination is also positive for our supply chain partners and the industry in creating new opportunities as satellite-based solutions become an increasingly integral part of the wider communications ecosystem. Our expanded business will deliver sustained EBITDA growth and strong cash generation, in turn supporting incremental profitable investment in capabilities and solutions to fulfil rapidly expanding and evolving customer demand while also delivering sustained returns to shareholders,” Al-Saleh added.

David Wajsgras, CEO of Intelsat, commented: “Over the past two years, the Intelsat team has executed a remarkable strategic reset. We have reversed a 10-year negative trend to return to growth, established a new and game-changing technology roadmap, and focused on productivity and execution to deliver competitive capabilities. The team today is providing our customers with network performance at five 9s and is more dedicated than ever to customer engagement and delivering on our commitments. This strategic pivot sets the foundation for Intelsat’s next chapter. By combining our financial strength and world-class team with that of SES, we create a more competitive, growth-oriented solutions provider in an industry going through disruptive change. The combined company will be positioned to meet customers’ needs around the world and exceed their expectations.”

Meanwhile, SES has announced Q1 financial results, calling the figures “a solid start” to the 2024 financial year. Highights include:

•    Revenue of €498 million (+2.5 per cent YOY) and Adjusted EBITDA of €275 million (+4.7 per cent YOY)
•    Networks up 9.6 per cent YOY including periodic revenue, with Video performance (-5.2 per cent YOY) in line with expectations
•    More than €125 million of new business and contract renewals signed in Q1 2024
•    Adjusted Free Cash Flow of €38 million net inflow compared with €(41) million net outflow in Q1 2023
•    Outlook for FY 2024 Revenue, Adjusted EBITDA, and capital expenditure on track and re-affirmed

Al-Saleh commented: “The first quarter results demonstrate our solid start to the year, and we continued to deliver commercial momentum across the business, underpinning our FY 2024 financial outlook which is on track and unchanged. Our Networks business now accounts for over 50 per cent of revenue and delivered YOY growth including periodic revenue from a contract modification which allowed us to recontract capacity on our highly contended MEO fleet and generate incremental cash flows. In Video, our Sports & Events offering continued to be the standout performer, adding to its impressive line-up of customers with an exciting new agreement with a global tier one sports brand to distribute live content to audiences across the world.”

“April 2024 delivered a landmark milestone for SES with the entry into commercial service of O3b mPOWER, our next generation MEO constellation, strengthening our capability to deliver competitive and differentiated customer solutions in valuable, high growth government, mobility, and fixed data markets. The next O3b mPOWER satellites (7-8) are on track be launched in late 2024 launch and bring improved resiliency to the network which will be further expanded with the launch of satellites 9-11 plus 12 & 13 in 2025 and late 2026 respectively,” he concluded.

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