Rocket Lab is buying Iridium Communications in an $8 billion cash-and-stock deal – equipping the rocket maker with a global satellite network and wireless spectrum in what looks like a bid to compete against Elon Musk’s SpaceX.
The deal is the latest in a flurry of aerospace tie-ups involving satellite operators in the past year: Globalstar agreed in April to be acquired by Amazon.com, while Luxembourg-based SES completed its purchase of Intelsat last year. SpaceX also agreed to acquire spectrum assets from EchoStar.
Iridium – which logged $114 million of net income on $872 million in revenue last year – operates a network of 66 low-Earth-orbit satellites that provide connectivity for handsets and other equipment used by ships, mining operations, U.S. government agencies and other customers. The company’s spectrum rights are especially valuable because they can be used worldwide.
Rocket Lab’s purchase values Iridium shares at $54 apiece, implying an enterprise value of about $8 billion for the McLean, Va.-based satellite operator, Rocket Lab said Monday. Iridium stock closed at $43.52 on Friday and has climbed in recent weeks as investors increasingly focused on the value of the company’s spectrum holdings.
Rocket Lab shares rose 6.8% in Monday trading, while Iridium stock jumped 20.8%.
The acquisition comes as SpaceX continues to expand its satellite services among consumers and government customers, which has spurred rivals to make moves while fueling consolidation across the satellite industry.
SpaceX’s Starlink business uses the company’s own rockets to keep launch costs down and has a constellation of roughly 10,000 satellites.
While SpaceX dominates heavy-lift launches and operates the large Starlink broadband constellation, Rocket Lab has specialized small satellite launches.
Iridium has faced growing questions in recent months over how much of a threat SpaceX poses to its business, which connects specialized phones through satellites.
Rocket Lab said combining its launch business and satellite manufacturing operations with Iridium’s global network and spectrum rights would strengthen its position in the market. The company plans to eventually build a revamped satellite fleet to overhaul Iridium’s existing constellation.
Rocket Lab began as a launch provider roughly 20 years ago but has spent the past several years expanding into satellite manufacturing and operations through a series of acquisitions. Company executives have repeatedly said they want to operate their own satellite network rather than only build and launch spacecraft for customers.
Iridium was an early pioneer in low-Earth-orbit satellite networks, launching its first satellites nearly 30 years ago. The company later filed for bankruptcy before reorganizing.
“Success will come from those who can bring new innovations to space quickly and sustain them over time as efficiently as possible,” said Iridium Chief Executive Matt Desch in announcing the deal.