The founder and managing director of British small-satellite builder Surrey Satellite Technology Ltd. (SSTL) said he personally endorsed the company’s sale to Astrium, a large satellite conglomerate, because of guarantees from Astrium that SSTL would remain independent –
even when it competes with Astrium.


In an April 10 interview, Sir Martin Sweeting said Astrium, owned by Europe’s largest aerospace company, EADS, gave specific assurances to the British government and the British Defence Ministry that SSTL’s corporate culture would not be overwhelmed in the Astrium bureaucracy.


“Negotiations on the sale of SSTL have been going on for six months, and I talked to all the bidders,” Sir Martin said. “The bids were all fairly good in financial terms, but Astrium gave the most specific assurances about our continued independence.”


In an agreement announced April 7, Britain’s University of Surrey, which owns a majority of SSTL, and Astrium Satellites announced that Astrium would be buying the successful small-satellite builder.


In addition to purchasing almost all of the university’s SSTL ownership, Astrium will be buying the 10 percent of SSTL owned by Space Exploration Technologies of Hawthorne, Calif.
, and the 5 percent stake owned by SSTL employees. All three transactions are being concluded on the same terms and conditions. Industry officials valued the all-cash transaction at around 45 million British pounds ($89.7 million).


The university will retain a symbolic 1 percent share of SSTL’s equity after the sale, which is pending approval by British and European regulators.


Astrium had approached SSTL several years earlier about a possible sale and had been rejected on the grounds that a large enterprise like Astrium, one of the world’s biggest satellite builders, would smother SSTL.

But in 2007, SSTL and the university concluded that their relationship had to end if SSTL was to be allowed to grow. The company has built 27 satellites since 1981 and has 13 more on order. In recent years it has been slowly increasing its presence in the commercial market, and has found itself in need of loan guarantees and other financial backing that the university could not provide.


The university’s director of corporate services, Greg Melly, said
the university
naturally was looking to monetize its more than two decades of investment in SSTL. But it
equally was determined not to put the company into the hands of a buyer that would destroy SSTL.


In an April 7 interview, Melly agreed with Sir Martin that Astrium’s assurances about its intentions for SSTL were broader and deeper than any other bidder’s, irrespective of the financial terms.


“We are not commercially nave,” Melly said. “But we are hugely proud of the success of this company, and the buyer’s integrity, its approach to the market,
where it competes –
all this was key to us. Astrium gave us more assurances about how this would be done than anyone else.”


Sir Martin will remain with the company, and SSTL will have an independent board of non-executive directors that will not be appointed by Astrium, Melly said. Sir Martin confirmed that he has no intention of leaving SSTL.


Melly and Sir Martin said Astrium gave specific guarantees about SSTL’s expected bid to build at least some of the 26 Galileo satellite navigation satellites to be contracted by the European Commission and the European Space Agency later this year.

Astrium, led by its German division, is bidding to build all 26 Galileo spacecraft, and SSTL has indicated it might bid with OHB System of Bremen, Germany, for some of the satellites.


For Astrium, the profitability of a contract to build 26 identical satellites likely would be far superior to a contract for 15-20 satellites.


Nonetheless, Astrium has promised that SSTL will be allowed to make a bid. “We’ve had those assurances quite categorically,” Sir Martin said. “The [European Commission] is looking to open competition for Galileo, so if SSTL doesn’t bid [against Astrium], someone else will. So from Astrium’s point of view, it would be better to have a competing supplier that you own than a competing supplier that you don’t own.”
While SSTL and Astrium occupy different market sectors –
Astrium concentrates on large satellites, space infrastructure and government business in Britain, France and Germany –
they have found themselves in competition with increasing frequency.


Astrium’s French division has developed, with the French government, a line of small satellites for Earth observation and science that competes with SSTL’s famously low-priced product. At the same time, SSTL has begun development of larger satellites, hoping to apply its low-cost program management to bigger contracts.


Astrium spokesman Jeremy Close said the company
already has proven its ability give subsidiaries a broad independence with Tesat Spacecom of Germany, a builder of satellite components and laser communications terminals that occasionally competes with Astrium.


“The Tesat model is the one we are applying here,” Close said April 7. “We think the Tesat history gives us credibility when we say we are determined to let SSTL continue to do what it does best.”

SSTL reported revenue
of 26 million British pounds for the fiscal year ending July 31, with a net profit of 1.2 million pounds. Sir Martin forecast that SSTL’s current backlog would generate revenue
of slightly less than 46 million pounds for the fiscal year ending in July, with a net profit of slightly less than 3 million pounds.