LUXEMBOURG - Friday, April 29th 2016 [ME NewsWire]
(BUSINESS
WIRE)-- SES S.A. (NYSE Paris:SESG) (LuxX:SESG) has agreed to increase
its interest in O3b Networks (O3b) to 50.5% and, in doing so, will take a
controlling share in the company. The transaction is subject to
regulatory approvals which are expected to be completed during H2 2016.
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SES will
pay USD 20 million to increase its fully diluted ownership of O3b from
49.1% to 50.5%, bringing its aggregate equity investment in O3b to date
to USD 323 million (EUR 257 million). On completion, SES will
consolidate O3b’s net debt, which is currently USD 1.2 billion. The
transaction is expected to generate returns exceeding SES’s hurdle rates
for infrastructure investments.
Strengthening SES’s differentiated global network and capabilities
Expanding SES’s global reach and satellite-enabled solutions by
complementing SES’s GEO network with O3b’s unique, ‘game-changing’
global solution, in operation since September 2014
Augmenting
SES’s differentiated capabilities in Enterprise, Mobility and Government
by adding O3b’s dynamic suite of products and customers
Enhancing SES’s foundations for sustainable growth with O3b’s strong
growth outlook underpinned by its unique service offering
Karim
Michel Sabbagh, President and CEO, commented: “The move to take control
of O3b is a game-changing acquisition and a major step in the execution
of SES’s differentiated strategy and complements SES’s growth strategy.
O3b
delivers a unique capability and solution, which is already in
operation, for Enterprise, Mobility and Government clients, particularly
for applications where low latency is an increasingly essential
feature. The combined GEO/MEO satellite network and capabilities give
SES a truly compelling and differentiated service offering within the
industry, strengthening SES’s unique positioning across the data-centric
markets.
The consolidation of O3b – the fastest growing
satellite network – significantly enhances SES’s long-term growth
profile with the constellation expected to generate annualised revenues
of between USD 32 million and USD 36 million per satellite at
steady-state. Looking forward, both SES and O3b will benefit from the
strong synergies and strategic fit across both businesses.”
O3b Networks – a unique, game-changing global solution
O3b
Networks operates a constellation of 12 High Throughput Satellites
(HTS) in a Medium Earth Orbit (MEO) around 8,000 kilometres from the
Earth. The company offers customers a ‘fibre in the sky’ solution, with
each of the constellation’s beams capable of delivering up to 1.6
Gigabits per second (Gbps) of throughput at a low latency of less than
150 milliseconds, a significant improvement over geostationary
connectivity.
Since beginning commercial operations in September
2014, O3b has become the fastest growing satellite network in history in
terms of capacity contracted. The company now serves more than 40
Enterprise, Mobility and Government clients across 31 countries. To
date, over 50% of customers have already upgraded their initial service
commitments, demonstrating the attraction of O3b’s unique and
‘game-changing’ solution. Consequently, O3b has a fully protected
contract backlog of USD 350 million. O3b’s global customer base includes
Digicel Pacific, Royal Caribbean Cruise Lines, American Samoa Telecom,
Speedcast, Rignet, Bharti International (Airtel), Timor Telecom, CNT
Ecuador, Entel Chile and (via SES Government Solutions) the U.S.
National Oceanic and Atmospheric Administration (NOAA).
O3b has
procured an additional eight satellites to accommodate rapidly-expanding
demand, with four satellites expected to be launched during H1 2018,
and the remaining four satellites expected to be launched in H2 2019.
These procurements will increase the size of the current fleet from 12
to 20 satellites (including three satellites currently flying as
in-orbit back-up). At ‘steady-state’ utilisation, which is targeted to
be achieved by the end of the third year of a satellite’s commercial
service, the full operational constellation is expected to generate
annualised revenue of between USD 32 million and USD 36 million per
satellite.
O3b is expected to generate revenue of more than USD
100 million in 2016, nearly doubling the revenue recorded in 2015. The
company’s operational and financial performance trends are currently
consistent with the criteria that SES requires to be satisfied before
moving to control, including significantly improving EBITDA. The
acquisition is expected to become free cash flow accretive to SES
(before financing activities) by 2018 and become net income accretive to
SES by 2018/2019.
As part of the IFRS purchase accounting
treatment, the transaction will give rise to recognition of a gain of
approximately USD 500 million relating to the remeasurement to fair
value of the current non-controlling interest in O3b. The final amount
will depend on the closing date of the transaction.
SES’s
BBB/Baa2 investment grade credit rating is expected to be re-affirmed by
Standard & Poor’s and Moody’s. Having agreed to acquire a
controlling share of O3b, with the ensuing consolidation of the
company’s debt, SES will assess over the coming months the optimisation
of the enlarged group’s funding structure. SES is committed to
maintaining its progressive dividend policy.
Purchase Agreement
The
Board of O3b Networks has agreed to evaluate an Initial Public Offering
(IPO) process for the remaining 49.5% of O3b shares following receipt
of the requisite regulatory approvals, and subsequent completion of
SES’s increase in ownership to 50.5%.
From 29 April 2016, and
subject to O3b not having launched an IPO, SES has a call option to
acquire all of the remaining 49.5% of shares in O3b for a baseline sum
of USD 710 million, adjusted for an interest charge, calculated at
market rates, to reflect the timing of the potential exercise of the
call option. Any decision which SES may take to exercise the call option
will be subject to satisfying the company's stated investment hurdle
rates. Should such an exercise be relevant, and depending on the timing,
potential financing sources, including capital markets, will be
evaluated to determine the most appropriate financing option, in keeping
with the company's commitment to maintaining SES’s investment grade
credit status (BBB/ Baa2).
A put option, effective from 1 October
2017 and subject to O3b not having launched an IPO, is held by the
other shareholders of O3b, under which SES would have the obligation to
acquire all of the remaining shares in O3b for a baseline sum of USD 710
million, adjusted for an interest charge, calculated at market rates,
to reflect the timing of the potential exercise of the put option.
Additional information is available on the SES website at www.ses.com
ANALYST PRESENTATION
A call for investors and analysts will be hosted at 9:30 CET on 29 April 2016.
Participants are invited to call one of the following numbers five minutes prior to this time.
Belgium
+32 (0)2 400 1972
France
+33 (0)1 76 77 22 42
Germany
+49 (0)69 2222 10642
Luxembourg
+352 2088 0168
UK
+44 (0)20 3427 1932
USA
+1 646 254 3373
Confirmation Code:
4836025
A
presentation, which will be referred to during the calls, will be
available for download from the Investor Relations section of the SES
website at www.ses.com
A replay will be available for one week on the SES website at www.ses.com
Disclaimer / “Safe Harbor” Statement
This
presentation does not, in any jurisdiction, and in particular not in
the U.S., constitute or form part of, and should not be construed as,
any offer for sale of, or solicitation of any offer to buy, or any
investment advice in connection with, any securities of SES nor should
it or any part of it form the basis of, or be relied on in connection
with, any contract or commitment whatsoever.
No representation or
warranty, express or implied, is or will be made by SES, its directors,
officers or advisors or any other person as to the accuracy,
completeness or fairness of the information or opinions contained in
this presentation, and any reliance you place on them will be at your
sole risk. Without prejudice to the foregoing, none of SES or its
directors, officers or advisors accept any liability whatsoever for any
loss however arising, directly or indirectly, from use of this
presentation or its contents or otherwise arising in connection
therewith.
This presentation includes “forward-looking
statements”. All statements other than statements of historical fact
included in this presentation, including, without limitation, those
regarding SES’s financial position, business strategy, plans and
objectives of management for future operations (including development
plans and objectives relating to SES products and services) are
forward-looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties and other important factors that
could cause the actual results, performance or achievements of SES to be
materially different from future results, performance or achievements
expressed or implied by such forward-looking statements. Such
forward-looking statements are based on numerous assumptions regarding
SES and its subsidiaries and affiliates, present and future business
strategies and the environment in which SES will operate in the future
and such assumptions may or may not prove to be correct. These
forward-looking statements speak only as at the date of this
presentation. Forward-looking statements contained in this presentation
regarding past trends or activities should not be taken as a
representation that such trends or activities will continue in the
future. SES and its directors, officers and advisors do not undertake
any obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
Contacts
SES
Mark Roberts
Investor Relations
Tel. +352 710 725 490
Mark.Roberts@ses.com
or
Markus Payer
Corporate Communications
Tel. +352 710 725 500
Markus.Payer@ses.com
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