Rocket Lab has agreed to buy Iridium Communications in a cash-and-stock deal that gives it access to satellites and valuable wireless spectrum.
According to Reuters the move gives Rocket Lab more tools to compete with SpaceX, whose satellite services are piling pressure on older space communications outfits.
Rocket Lab said the deal values Iridium shares at $54 each. That gives the McLean, Virginia-based company an enterprise value of about $8 billion.
Iridium shares closed last week at $43.52 and have gained lately as investors warmed to the value of its spectrum holdings.
Iridium has faced questions about the threat SpaceX poses to its business of connecting specialist phones by satellite. Several long-standing satellite companies have found partners as the industry squashes itself into fewer, bigger lumps.
Globalstar agreed in April to be taken over by Amazon.com. Luxembourg-based satellite operator SES completed its acquisition of Intelsat last year.
SpaceX agreed to buy spectrum holdings from EchoStar.
Rocket Lab said the deal would combine its launch and satellite manufacturing operations with Iridium’s global reach and spectrum assets.
In time, Rocket Lab plans to use those resources to build an upgraded satellite fleet replacing Iridium’s current constellation.
Iridium operates 66 low-Earth-orbit satellites that connect handsets and other devices used by ships, mining sites, US government agencies, and other customers.
Its spectrum rights can be used worldwide, which makes them especially valuable.
Rocket Lab chief executive Peter Beck said Iridium’s satellites can run for at least another decade. That gives Rocket Lab time to build the future network.
“Not only do we get an amazing spectrum that we can build on, but we get a business that’s already generating cash,” Beck said in an interview.
Iridium generated $114 million in net income last year on $872 million in revenue. Rocket Lab started as a launch provider two decades ago.
More recently, it has been buying businesses tied to satellite production and operations.
Company executives have said they wanted to operate their own satellite fleet, rather than only launch and build gear for other clients.
Iridium helped pioneer low Earth orbit satellite networks, with its first satellites launched almost 30 years ago. It went bankrupt soon afterwards, was reorganised, and continued orbiting.
Iridium chief executive Matt Desch, who has led the company since 2009, said the deal would help the combined company grow faster.
Desch said it would bring more satellite projects in-house and reduce internal costs.
“The real winners are going to be those who are vertically integrated. Not many can do that, but those that can will have the ability to make business cases work a lot better,” he said.
