(Reuters) -Satellite operator Eutelsat signed an agreement to buy about 24% of its British rival OneWeb for $550 million, a "compelling" entry point to low Earth orbit (LEO) opportunity, the French company said on Tuesday.
The cash-only transaction, which is the biggest M&A deal for Eutelsat's chief executive Rodolphe Belmer since he took office in 2016, will make the company OneWeb's third-biggest shareholder after the British government and India's Bharti Global.
OneWeb, which also counts Japan's SoftBank among its investors, aims to provide high-speed broadband internet services globally using LEO satellites.
Belmer said in a statement the company was excited to become "a shareholder and partner in OneWeb" in the run-up to its commercial launch and to participate in the opportunity provided by satellites orbiting the earth at an altitude of about 700-1,500 kilometres.
The constellation, developed in partnership with Airbus, will eventually consist of 648 satellites. Eutelsat said its and OneWeb's resources and assets were complementary, which should allow the optimisation of both companies' commercial potential, with OneWeb becoming Eutelsat's main growth engine outside broadcast and broadband applications. Earlier this month, analysts at Exane BNP flagged the risk Eutelsat could lose the mega constellations race to rivals, such as SES, with 30% of its revenue in jeopardy.
Eutelsat reported half-yearly revenues of 613.1 million euros ($740.69 million) in its five core businesses in February, betting on sales of 1.19-1.22 billion euros for the full year ending June. The French operator's investment will come with similar rights to the British government and Bharti, including board representation. OneWeb, which is racing against Elon Musk's SpaceX, emerged from bankruptcy protection last year helped by a disputed investment from the British government, and Bharti. Eutelsat expects to close the acquisition in the second half of 2021.
($1 = 0.8277 euros)
(Reporting by Piotr Lipinski in Gdansk; Editing by Catherine Evans and Barbara Lewis)