Rocket Lab is set to acquire Iridium Communications in a deal valued at $8 billion, which combines cash and stock. This acquisition will provide Rocket Lab with a global satellite network and the necessary radio spectrum to better compete against SpaceX, founded by Elon Musk.
This transaction is part of a broader trend in the aerospace sector, where satellite companies are merging. For instance, Amazon.com announced its agreement to acquire Globalstar in April, while SES from Luxembourg wrapped up its purchase of Intelsat last year. SpaceX has also moved to acquire spectrum assets from EchoStar.
Iridium, which generated a net profit of $114 million last year on revenues of $872 million, operates a fleet of 66 low-orbit satellites. These satellites enable connectivity for mobile devices used by various sectors, including maritime, mining, and several U.S. government agencies. The company’s spectrum rights hold significant importance due to their global applicability.
In this acquisition, Rocket Lab values Iridium shares at $54 each, translating to an enterprise value of approximately $8 billion. Rocket Lab’s announcement was made on Monday. Although Iridium closed at $43.52 on Friday, its stock price has risen lately as investors have recognized the value in its spectrum assets.
Following the announcement, Rocket Lab shares increased by 6.8%, while Iridium stocks climbed 20.8% during Monday’s trading.
This acquisition comes at a time when SpaceX is broadening its satellite offerings for both consumers and government entities, leading to a wave of consolidations in the satellite industry as competitors react. SpaceX’s Starlink service operates its own rockets to reduce launch costs and has approximately 10,000 satellites in orbit.
While SpaceX excels in heavy-lift launches and runs a significant broadband constellation, Rocket Lab focuses on launching smaller satellites.
Recently, Iridium has been facing scrutiny regarding the competitive threat posed by SpaceX, which provides satellite connectivity through specific mobile devices.
Rocket Lab believes that merging its launch services and satellite manufacturing capabilities with Iridium’s network and spectrum rights will bolster its market position. The company plans to eventually upgrade Iridium’s satellite fleet.
Founded nearly two decades ago primarily as a launch provider, Rocket Lab has expanded into satellite manufacturing and operations, aiming to run its own network instead of just launching spacecraft for others.
Iridium has a long history, being one of the early innovators in low-Earth orbit satellite networks, with its first satellite launched nearly three decades ago. Although it faced bankruptcy at one point, it managed to reorganize successfully.
“The companies that will thrive are those that can rapidly introduce new innovations in space and sustain them efficiently over time,” stated Iridium CEO Matt Desch in relation to the deal.
