SoftBank plans to merge satellite groups OneWeb and Intelsat
Tie-up involves a capital injection of $1.7bn in cash from Japanese group
SoftBank plans to invest $1.7bn to drive consolidation in the space technology sector with the merger of OneWeb, the US satellite start-up it backs, and Intelsat, the heavily indebted commercial satellite operator.
The Japanese technology group said on Tuesday it expected to acquire a 40 per cent voting stake in the combined entity through a purchase of common and preferred shares, which will help to reduce Intelsat’s debt by $3.6bn. But the deal is conditional on bondholders agreeing to the debt exchange offers over the next 90 days.
Intelsat’s debt maturing in 2023 whipsawed after news of the deal leaked, rising from 43 cents on the dollar to a high of 62 cents before paring some of its advance. The group’s 2024 maturing bonds jumped 14 cents on the dollar to 80 cents.
Its share price in New York gained 25 per cent on Monday, reaching $5.87 and giving the company an equity value of $661m. However, after SoftBank said it plans offer $5 per share in cash for shares it will purchase in the combined group, Intelsat’s shares retreated in pre-market trading.
“We are in the midst of a technological revolution . . . provided we receive the necessary co-operation from Intelsat bondholders,” said Masayoshi Son, the billionaire founder of SoftBank.
Intelsat has laboured under a debt load of more than $15bn after its 2008 leveraged buyout by private equity groups BC Partners and Silver Lake. The company has completed distressed debt exchanges to reduce liquidity strains, moves that rating agency S&P Global has said constitutes default.
The Luxembourg-based company has struggled to increase revenues since its buyout, with sales sliding in each of the past three years. Jacques Kerrest, Intelsat’s chief financial officer, told analysts on a conference call in October that the company’s priority last year was to “raise liquidity” through the debt exchanges.
The move by SoftBank came just two months after OneWeb raised $1.2bn from the Japanese group and other investors.
OneWeb, which competes with Elon Musk’s SpaceX, has said it would use fresh capital from its latest funding round in December to launch a satellite network to provide affordable internet access to remote parts of the world. In addition to SoftBank, the US venture is also backed by US chipmaker Qualcomm, the European aerospace group Airbus, Sir Richard Branson’s Virgin, and Bharti, the Indian conglomerate.
OneWeb already has existing ties with Intelsat, which invested $25m in the venture in 2015.
“As an early equity investor in OneWeb, we recognised a network that was . . . a fit with our long-term strategy,” said Stephen Spengler, Intelsat’s chief executive.
Noting that the two companies’ technologies are complementary, with a shared goal of applying satellites to bridge the digital divide, Jefferies analyst Giles Thorne said: “We’d therefore suggest that SoftBank’s intent is to back an operator with the asset mix to be structurally relevant long-term in the big data verticals of tomorrow, such as the connected car.”
SoftBank’s involvement in the shake-up of the satellite industry comes as Mr Son is also preparing to consolidate the US telecoms industry. Mr Son has recently said he is open to all options for Sprint, the US wireless carrier SoftBank owns, including a merger with rival T-Mobile USA or other companies.
Mr Son’s deal activity has accelerated after SoftBank spent $32bn to acquire UK chip designer Arm last year. Most recently, the company positioned itself in the world of private equity and hedge funds with a $3.3bn acquisition of US alternative asset manager Fortress Investment Group.
More acquisitions are expected as SoftBank emerges as one of the world’s largest investors with the imminent launch of its record-setting $100bn technology fund.
SoftBank said it expects to approach the Vision Fund and may transfer its shares in the OneWeb/Intelsat deal pending regulatory and investor approval.