Satellite builder OHB Technology of Bremen, Germany, is purchasing Munich-based Kayser Threde to prevent that company from doing to OHB what OHB has done to Astrium, Germany’s largest space-hardware builder.

In a June 29 conference call with investors explaining the purchase, OHB Technology Chief Executive Marco R. Fuchs said OHB was concerned that Kayser-Threde was moving up the food chain to become a full satellite system integrator on the strength of its expected contract to build the German government’s EnMap Earth observation satellite.

Work on the EnMap hyperspectral imaging spacecraft would give Kayser-Threde a profitable revenue stream for several years and the credibility to seek other satellite prime contracts for the German government and other customers – in direct competition with OHB and with Astrium.

That is precisely what OHB did to Astrium starting in the mid-1990s. Stimulated by German government orders, especially the German Defense Ministry’s five-satellite SAR-Lupe radar reconnaissance contract, OHB dashed Astrium’s hopes for a near-monopoly position in Germany.

Fuchs said OHB was determined to keep Kayser-Threde from pulling up a third chair at the German government’s satellite prime contractor’s table.

“OHB cannot wait while a third company builds up satellite system capabilities in Germany,” Fuchs said during the conference call. “EnMap was the key reason why we had to do this acquisition. Now, other than [Astrium], there will be nobody else in the German space market, and that helps us.”

OHB is paying 5.95 million euros ($8 million) in cash for Kayser-Threde, plus the assumption of about 10 million euros in debt. The transaction is expected to be completed by mid-July.

Kayser-Threde GmbH in 2006 reported revenues of 38 million euros, but had pretax profit of just 1.2 million euros. The company’s backlog as of January was about 29 million euros, a figure that does not include the large EnMap project, whose final construction contract has not been signed.

Fuchs said that EnMap plus other business in Germany’s growing space business should bring Kayser-Threde’s revenues to 42 million euros this year and around 55 million in 2008. The EnMap contract alone is expected to be worth around 60 million euros.

Kayser-Threde Chief Executive Juergen Breitkopf said during the conference call that Kayser-Threde’s growth potential as an independent company has been restricted by a lack of financing, a problem that should be solved once it becomes a wholly-owned division of OHB.

“We had good projects and a good strategy, but we were lacking in resources – that means money,” Breitkopf said. “The reaction of our employees [to the OHB purchase] has been very, very positive because of our equity situation. It’s a good deal for everybody.”

Kayser-Threde, which employs 214 people, for years has done satellite component and other subsystem work, much of it under contract to Astrium or OHB or other prime contractors whose customers are government agencies.

Breitkopf said the pressure on subcontractors is huge, in part because for most government programs the prime contractor can select suppliers from anywhere in Europe, and sometimes has the capacity to do the work on its own. But the same prime contractor in many cases is in a position of strength in negotiating with its government-agency customer, who cannot benefit from a similarly cutthroat competition.

“Being a subsystem supplier is not really an attractive business model,” Breitkopf said. “That is what led to the EnMap decision.”

The Kayser-Threde purchase is the second strategic acquisition in two years, following the mid-2005 purchase of a majority stake in Ariane rocket-component builder MT Aerospace.

MT Aerospace then was suffering from the cyclical downturn in the commercial-launch market. Since then the market has improved. Fuchs said OHB expects to marry Kayser-Threde’s satellite optics capacity with OHB’s existing radar expertise to broaden the company’s portfolio at a time when many small- and midsize nations are considering whether to invest in their own Earth observation systems.

OHB reported revenues of 185.7 million euros in 2006. Net profit was 12 million euros, a 12 percent year-on-year increase. Backlog at Dec. 31 stood at 447.5 million euros, up 7 percent over the previous year.