Satellite company SES has agreed to buy Intelsat Holdings for US$3.1-billion in a deal that would create a major European player but raised investor concerns around debt, sending the buyer’s shares to a record low.

European satellite companies have been looking to consolidate to better compete with the likes of Elon Musk’s Space X-owned Starlink, and Amazon’s Project Kuiper.

While a move to gain scale was welcomed by analysts, concerns it might not do much to close the gap with US rivals, while saddling SES with debt, sent its Paris-listed shares down as much as 12% to €4.36, its lowest price ever.

The shares lost around 20% since a media report about renewed merger talks with Intelsat broke on Monday afternoon.

The new company would have a fleet of more than 100 geostationary and 26 medium-Earth-orbit satellites, the two companies said in a statement. That, however, compares with about 5 800 satellites that Starlink has in orbit.

The deal, unanimously approved by the two companies’ boards, should close in the second half of 2025 and will be financed through cash and new debt, including hybrid bonds, the companies said.

“The combined entity risks suffering from relatively high leverage, precisely at a time when traditional operators are grappling with escalating cost of debt and diminishing capital returns,” analyst Antoine Lebourgeois at Bryan Garnier said.

Luxembourg

SES and Intelsat, which emerged from bankruptcy in 2022, had held merger talks before but those collapsed in mid-2023.

Asked what had changed since then, SES CEO Adel Al-Saleh told analysts that an acquisition was easier to clear from the regulatory point of view than a merger, while Intelsat’s emergence from bankruptcy was also a factor.

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The new company would be headquartered in Luxembourg, and maintain a significant presence in the US, the companies’ statement said. The combination will bring synergies estimated at a net present value of €2.4-billion, they said. — Olivier Sorgho, (c) 2024 Reuters