European Union Approves Astrium’s Acquisition of SSTL

PARIS
— The European Union has approved the sale of British small satellite manufacturer Surrey Satellite Technology Ltd. (SSTL) to
‘s biggest aerospace conglomerate, EADS, the European Commission announced Dec. 18.

The commission judged that EADS’sAstrium Satellites division, which in the past has competed with SSTL to build small Earth observation satellites for nations inside and outside
Europe
, would not be able to use the purchase to become a dominant competitor in a market the commission said is “dynamic and rapidly growing.”

“Several new competitors have entered this market in recent years and after the proposed transaction, customers in the export market for [Earth observation] satellites would still have a choice between several significant alternative suppliers,” the commission said in announcing its decision.

Guildford-based SSTL over the past 20 years has carved out a profitable niche for itself in providing small, low-cost satellites mainly to governments. In recent years it has expanded its portfolio, but the small size of its satellite platforms, and their low cost, work against SSTL in the search for business from
Europe
‘s biggest government space contractor, the European Space Agency (ESA).

ESA’s
contracts usually are awarded on the basis of geographic return, meaning each nation contributing to a given program is guaranteed that its industry receives contracts corresponding to the government’s participation.

While SSTL officials have argued that their approach saves taxpayers money, the typical SSTL satellite is difficult to subdivide into separate contract compartments for distribution in other European nations without losing the cost-effectiveness that has been the company’s trademark.

The commission said this too argues in favor of permitting the EADS purchase insofar as competition for ESA work in
Britain
will not be compromised.

“[T]he commission found that SSTL’s business model, focusing on small, low-cost satellites and limited recourse to subcontracting, does not, as a general rule, fit well with [ESA] procurement rules,” the commission said. “To date, SSTL has been selected as a prime contractor for ESA in only one very specific instance.”

That specific instance was a contract to build ESA’sGiove-A navigation test satellite, which turned out to be indispensable for ESA and the European Union to be able to maintain their broadcast frequency reservations for the future Galileo navigation system.

SSTL is currently part of a team including OHB System of Bremen, Germany, to build part of the Galileo constellation – in competition with a consortium led by Astrium Satellites.

Astrium
officials have said they would not use its ownership of the small-satellite builder to undermine SSTL’s attractiveness as a Galileo supplier.

SSTL is currently owned 85 percent by the
University
of
Surrey
, 10 percent by Space Exploration Technologies (SpaceX) of the
United States
, and 5 percent by SSTL employees. Astrium will be purchasing the university and SpaceX shares for a price estimated at around 45 million British pounds ($65.6 million).

The company, which has 300 employees, reported a profit of 3 million pounds on revenue of 36 million pounds for the year ending June 30. Current backlog stands at 48 million pounds.