Rocket Lab Buys Satellite Operator Iridium in Bid to Challenge SpaceX
The $8 billion deal is part of a wave of consolidation in the satellite business
Rocket Lab RKLB 9.07%increase; green up pointing triangle agreed to buy Iridium Communications IRDM 20.84%increase; green up pointing triangle, a deal that would give it control over a satellite fleet and access to wireless resources it could use to compete with SpaceX SPCX 0.78%increase; green up pointing triangle.
The cash-and-stock deal values shares of Iridium at $54 each, suggesting an $8 billion enterprise value for the McLean, Va.-based company, Rocket Lab said Monday. Iridium’s stock ended last week at $43.52 and has gained ground lately as investors bet on the value of its spectrum holdings.
SpaceX’s satellite offerings are gaining traction among consumers and government customers, heaping pressure on competitors and prompting a wave of consolidation across the industry. Iridium has faced questions in recent months about the threat SpaceX poses to its business using satellites to connect specialized phones.
Several longstanding satellite companies have found partners, including Globalstar, which in April agreed to be taken over by Amazon.com. Luxembourg-based satellite operator SES last year completed its acquisition of Intelsat. SpaceX itself agreed to purchase spectrum holdings from EchoStar.
Rocket Lab said Monday the deal would marry its launch and satellite manufacturing capabilities with Iridium’s global reach and spectrum assets. In the future, Rocket Lab plans to use those resources to develop an upgraded satellite fleet that would replace Iridium’s current constellation.
Shares of Rocket Lab jumped 6.8% in Monday morning trading. Iridium shares gained 20.8%.
Iridium operates 66 satellites in low-Earth-orbit right now that connect handsets and other devices used by ships, mining sites, U.S. government agencies, and other customers. Its spectrum rights can be used around the globe, making them especially valuable.
Iridium’s satellites can operate at least another decade, Rocket Lab Chief Executive Peter Beck said, giving his company time to create 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.