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Rocket Lab says it has agreed to buy Iridium in an $8 billion deal propelling the launch services company into the satellite communications services business.
Rocket Lab says it would pay for the transaction through a combination of cash and stock. The companies expect the deal to close in about a year.
“Rocket Lab will become a fully integrated, self-launching space superpower,” Rocket Lab CEO Peter Beck said in presenting the deal. “By marrying Iridium's deep heritage, trusted infrastructure and highly sought-after spectrum with Rocket Lab's extensive and proven launch and manufacturing capabilities, we have the capability to unlock entirely new markets.”
The company pitched the proposed transaction as creating a company to rival the combination of SpaceX and EchoStar spectrum following a blockbuster deal last year, and this year’s $11.6 billion Amazon plan to buy Globalstar.
Rocket Lab says it would pay $54 for each Iridium share, with $27 of that in cash and the rest in stock.
The company adds that it has secured $3.6 billion in committed debt financing for the deal. The money is due to be used to refinance some Iridium debt and help pay for the transaction, with Rocket Lab taking $1.5 billion from its own balance sheet to fund the cash portion of the deal, CFO Adam Spice says. The arrangement also will allow Rocket Lab to continue to invest in its operations and consider further acquisitions, he notes.
The proposed transaction comes about eight months after Iridium said it was looking to reposition its business in the face of the changing satellite services landscape. The company, at the time, paused a share repurchase plan and said it was looking to pursue acquisitions, while not ruling out someone might make a play for the company. Iridium last month said it had agreed to acquire Aireon, the provider of space-based air traffic surveillance services.
Rocket Lab says the deal would also add recurring-revenue streams to its business. Iridium, which made its name as a satellite communications company, has been trying to seek new business opportunities, particularly in the field of alternative position, navigation and timing services.
Beck says the deal presented a shortcut for Rocket Lab to enter the space application market, noting Iridium’s L-band spectrum was particularly attractive to accelerate the company’s entry into this new business segment. Post-close, Beck says that “rather than simply continuing Iridium’s network, we will build upon it and scale it into untapped markets and pioneering new space-based services.”
Iridium will add 66 operational satellites and 14 on-orbit spares, more than 2.5 million subscribers and profit. Iridium had $871 million in sales last year and generated $495 million in adjusted operating earnings.
Investors in both companies cheered the transaction, with Rocket Lab’s stock up more than 12% in pre-market trading, while Iridium shares were up over 20% ahead of the opening bell.
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