Consolidation among satellite operators is a notoriously tricky and rare affair.
Even when market conditions strongly suggest a merger would create significant financial and operational advantages, it is often seen as a non-starter in an industry rife with unique regulation and nationalistic protectionism.
Since leaving its roots as a nonprofit intergovernmental organization created in 1979, British satellite operator Inmarsat has successfully changed hands between public and private financial investors.
The last time was in 2020, when the company was sold to a group of mostly foreign financial investors in a $3.4 billion all-cash deal that took it off London’s stock exchange.
But will U.S.-based satellite operator Viasat’s plan to buy Inmarsat for $7.3 billion through a mix of cash and shares also clear regulatory hurdles?
It’s uncharted waters for Viasat and the U.K., where new national security procedures only recently came into play.
The UK National Security and Investment Act 2021 (NSI Act), which came into force Jan. 4, gives the government more power to scrutinize and intervene in acquisitions of companies in space and other sensitive areas.
It forms the foundation of a new stand-alone mandatory regime that significantly expands national security review powers that previously came under the Enterprise Act 2002.
However, “national security” remains undefined, opening up a gray area for deal-makers.
The British government issued a public interest intervention notice under the Enterprise Act 2002 the last time Inmarsat was being sold.
That led to Connect Bidco, a consortium of two Canadian pension funds, New York-based Warburg Pincus and Apax Partners in London, pledging to keep core Inmarsat functions in the United Kingdom to push their deal through.
Those commitments included keeping Inmarsat’s main network operations center and skilled engineering resources in the country for a period of time after the acquisition.
Viasat has already made similar commitments as it continues to meet with British government officials to discuss the deal and what it means for Inmarsat’s assets.
Notably, the Californian company already has a foothold in the country through Viasat UK, which performs a variety of communications work for mostly the British government, particularly for data security and information insurance applications.
In March, some nine months before the Inmarsat acquisition was announced, Viasat opened cybersecurity and network operations centers in the U.K, saying they marked the start of plans to invest more than 300 million British pounds ($408 million) in the country.
The company said the investment is needed to lay the groundwork for its second of three planned ViaSat-3 satellites, which aims to cover Europe, the Middle East and Africa.
Announcing the plans to buy Inmarsat on Nov. 8, Viasat outlined intentions to build on the British operator’s U.K. presence and support the country’s recently published National Space Strategy.
Viasat signaled progress on the regulatory front in a shareholder letter accompanying its quarterly financial results Feb. 3, saying it continues to “expect the deal to close between nine and 18 months after signing, likely by the end of the calendar year.”
The letter also said it had submitted a pre-merger notification under antitrust regulations with the U.S. Department of Justice and “prepared regulatory filings for many additional jurisdictions around the world.”
As well as multiple regulatory hoops that Viasat must fly through on both sides of the Atlantic Ocean, the Nasdaq-listed company’s shareholders also need to give their approval for the deal to go ahead. A shareholder vote on the acquisition has not yet been scheduled.
In the meantime, Viasat said Feb. 3 that it had started internal integration planning for its largest-ever acquisition, setting the company up to expand across multiple orbits and spectrum bands in a transforming industry.
This article originally appeared in the February 2022 issue of SpaceNews magazine.