Satellite operator Eutelsat Communications is to acquire the GE-23 satellite, associated customer contracts and orbital rights from GE Capital for US$228m.
Eutelsat stated that the acquisition is part of its strategy to expand its presence in the…
Satellite operator Eutelsat Communications is to acquire the GE-23 satellite, associated customer contracts and orbital rights from GE Capital for US$228m.
Eutelsat stated that the acquisition is part of its strategy to expand its presence in the Asia-Pacific region, which it sees as a key growth market. The company already has a satellite, Eutelsat-70B, which is equipped with a dedicated Asian beam and is due to be launched in Q4 2012.
The GE-23 satellite was launched in 2005 and is located at 172E. It is based on the Thales Alenia Space Spacebus 4100-C3 with a payload of 20 Ku-band transponders accessing five interconnecting beams and 18 C-band transponders connected to a trans-Pacific beam.
The satellite, which will be renamed Eultesat-172A, is expected to have 8.5 years of estimated useful life remaining. It currently has a fill rate of just over 80% with its C-band transponders leased for cellular backhaul and its Ku-band transponders currently used for a mix of VSAT, US governmental and maritime services. Eutelsat expects continuous low-to-mid single digit growth in the multi-usage market over the next few years.
The all-cash transaction, which is expected to close in the second half of 2012, is understood to have valued the GE Satellite at just over 5 times EBITDA and will be financed through Eutelsat’s existing liquidity. The Paris-based operator said that while this will lead to a moderate increase in its net debt / EBITDA ratio, it is not expected to have a material impact.
The acquisition is anticipated to be EBITDA margin and earnings accretive in year one with the IRR in double digit figures.
Speaking at an investor and analyst conference call, Eutelsat deputy CEO Michel Azibert said that the orbital rights Eutelsat acquired are in the C and Ku-band at 172E. However, GE Satellite also had a number of filings through Ofcom for neighbouring positions and there are additional spectrum rights at 172E.
Indeed, one source suggested that the satellite operator could easily co-locate another, much larger satellite at that orbital slot. That being so, Eutelsat said that it has no replacement plans for GE-23 in the short to medium term and that it will not need to address this until 2015.
The satellite operator’s chief executive, Michel de Rosen, also said that the GE satellite management team were not included as part of the transaction but that Eutelsat has been impressed by their quality and is set to hold discussions with the hope of bringing most of them on board.
As to why Eutelsat made such a purchase only now, de Rosen said that the company had been looking to break into the Asia-Pacific market for a number of years but did not want to pay over the top for any asset. He pointed to one opportunity that Eutelsat had been recently looking at but gave up on as it was too expensive.
De Rosen added that there were no additional similar bolt-on Asian acquisitions imminently on the agenda.
GE-23 was originally called AMC-23 and was owned by rival operator SES but was sold to GE Capital as part of the spin-off transaction that the two parties undertook in early 2007. This deal saw GE swap its 19.5% holding in SES for €588m in cash, the AMC 23 satellite, Satlynx and minority stakes in AsiaSat, Star One and Orbcomm.
SatelliteFinance understands that as part of the spin-off transaction GE Capital was subject to a five year lock-in regarding the sale of GE-23 and that this came to an end on 31 March, hence why the transaction took place now.
Goldman Sachs advised Eutelsat on the deal while Trinity Advisers advised GE Capital.
The move comes at the same time as Eutelsat’s peer SES announced that it is looking to potentially invest in one or two additional satellites to increase its capacity in the Asia-Pacific region beyond 2012.
The satellite operator already has a new satellite, SES-8, which is due to be launched by SpaceX in the first quarter of 2013, that will be dedicated to expanding the company’s capacity for video services in South Asia and Indochina.
