LEO satellite startup OneWeb and Intelsat strike merger deal

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(Reuters) – OneWeb, a US satellite startup backed by Japan’s SoftBank Group, and debt-laden satellite operator Intelsat agreed to merge in a share-for-share deal on Tuesday.

OneWeb is among a handful of startups planning to build, launch and operate thousands of small satellites to provide internet access worldwide. Elon Musk’s Space Exploration Technologies Corp unveiled plans in January 2015 for an internet-via-satellite network that would eventually include some 4,000 satellites.

A merger of Intelsat with OneWeb would eventually create a combined network of hundreds or even thousands of satellites in high and low altitudes around Earth.

SoftBank will buy voting and non-voting shares in the combined company for $1.7 billion in cash and take a 39.9% voting stake. Shares that the Japanese conglomerate will buy in the combined company will be purchased for $5 per share.

Shares of Intelsat, which has a market value of about $630 million, were down 8.2% to $5.39 in late morning New York Stock Exchange trading.

The deal comes as SoftBank, which has traditionally focused on telecoms and technology, shifts focus to more cutting-edge tech investments as telecom services markets mature.

The merger will allow Luxembourg-based Intelsat, a satellite pioneer which broadcast Neil Armstrong’s moon walk, to address its roughly $15 billion debt pile. Intelsat announced a series of debt exchange offers on Tuesday, which when combined with SoftBank’s investment, will help reduce its debt by up to $3.6 billion. The merger and SoftBank’s investment are both conditional on approval from Intelsat’s bondholders.

OneWeb shareholders will receive Intelsat common shares in exchange for their shares while Intelsat shareholders will retain the shares they currently hold, the companies said. The combined company will be led by Intelsat chief executive Stephen Spengler and will be domiciled in Luxembourg.

Intelsat was an initial investor in OneWeb and took a minority equity stake in 2015, while SoftBank announced a $1 billion investment in OneWeb late last year.

(Reporting by Narottam Medhora in Bengaluru and Irene Klotz in Cape Canaveral, Fla.,; Editing by Anna Driver and Phil Berlowitz)

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