EADS In USD$1 Bln Satellite Comms Deal

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Published: August 1, 2011

European aerospace group EADS is to pay USD$ 960 million for satellite communications service provider Vizada in the latest of a series of deals making use of surplus cash.

The purchase, from private equity owner Apax France, is part of a strategy to reduce EADS’ exposure to cyclical manufacturing revenues, especially those at passenger jet unit Airbus.

Owned until now by Apax Partners, Vizada was formed in 2007 from a spin-off and combination of satellite services held by France Telecom and Norway’s Telenor.

It provides communications services to 200,000 users in maritime, aviation and defence and will become part of EADS’ Astrium space business.

“The growing demand for maritime services is a perfect cornerstone for Astrium to develop its commercial satellite communications business,” EADS said in a statement.

According to EADS, Vizada expects to generate around USD$ 660 million in revenue and USD$ 95 million in earnings before interest, tax, depreciation and amortisation this year.

The deal is EADS’ second-largest acquisition after the EUR€2.75 billion (USD$ 3.96 billion) buyout of BAE Systems’ 20 percent stake in its main subsidiary Airbus.

EADS said the latest deal would boost its earnings per share and generate “significant” synergies.

Analysts have welcomed the series of self-funded cash acquisitions, which have a lower hurdle for boosting earnings than those financed by paper, but expressed some concerns that EADS may be tempted to overpay to speed up external growth.

“I would say there is a risk of that,” said Nomura Equity Research analyst Jason Adams.

“Given the Satair one and the multiple they are paying for this, at some point the investors will be a bit concerned if they think EADS is overpaying for acquisitions.”

The company’s other options are limited as a buyback to whittle down EADS cash is complicated by the Franco-German-led company’s shareholder structure, which is also in some flux.

“EADS is wise to pursue such a bolt-on M&A strategy,” Adams said.

Apax Partners said the deal marked its third successful exit in the telecom sector over the last two months following sales of Prosodie and Outremer Telecom.

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