Ignoring recent investor complaints about new endeavors with much smaller profit margins than its core business, satellite-fleet operator SES Global purchased the 74.9 percent of satellite ground-infrastructure provider ND Satcom of Germany that it did not already own.

Luxembourg-based SES Global’s SES Astra subsidiary is buying the remaining shares of Friedrichshafen-based ND Satcom for 35.6 million euros ($45.2 million) from Agusta Technologie AG of Germany, a diversified technology company. The purchase price gives an implied value of 47.5 million euros for the ND Satcom business, or 59 percent of ND Satcom’s 80 million euros in 2005 sales.

Announcing the deal May 24, SES Astra said it could raise its purchase price as much as 12.8 million euros if ND Satcom is awarded a contract to provide the ground segment for the German Defense Ministry’s Satcom BW telecommunications satellite project. The two-satellite Satcom BW program is being managed as a hybrid procurement by the German government. Part of the deal is an outright purchase, and part is reserved as a services contract.

Astrium — the former EADS Space — has been selected as the preferred prime contractor and a firm contract is expected later this year. ND Satcom has been named preferred bidder for the ground network.

“Enhancing the government services offering is a key strategic objective,” SES Astra Chief Executive Ferdinand Kayser said in a May 24 statement announcing the ND Satcom purchase. “We will provide a combined ground and space offering to the government sector and take advantage of the growth potential for our core infrastructure business, in particularly the recently acquired New Skies assets.”

SES Global recently completed the billion-dollar purchase of satellite-fleet operator New Skies Satellites of The Hague, Netherlands, whose fleet includes Middle East and South Asia spot beams that have attracted government customers.

SES Global has been trying to increase its government business along the lines of what its SES Americom subsidiary has been able to do through its Americom Government Services division.

In a May 24 presentation to investors, SES Global said 70 percent of ND Satcom’s business is with government agencies, and that 76 percent of its 80 million euros in 2005 revenues is recurring. The company had 240 employees as of Dec. 31 and has regional sales centers in Abu Dhabi, Beijing and Dallas.

ND Satcom is expected to generate 40-45 million euros in revenues in the second half of 2006, with “mid-single-digit growth in 2007 and 2008,” SES Global said in the investor presentation. “Satcom BW … could provide an annual upside 2007-2009 in the range of 40 percent to 50 percent of revenues.”

But the figure that is most likely to be seized by Wall Street is ND Satcom’s 10 percent EBITDA — earnings before interest, taxes, depreciation and amortization — margin.

SES Global hastened to add in its investor presentation that the purchase will have no impact on the company’s net profit for 2006 and would be accretive starting in 2007.

SES Global, and especially its SES Astra division, specializes in selling satellite capacity — mainly in Europe and, through SES Americom, in the United States — for direct-broadcast television providers. It is a business that continues to offer 70 percent-plus EBITDA margins.

To diversify its revenue base and provide new business for its satellite fleet, SES Global in the past two years has made several purchases of companies whose main business is providing satellite-based solutions to businesses and governments — a business whose gross margins are 10 percent or less.

SES Global managers have repeatedly said that these companies ultimately could be made more profitable, and that in any case they direct satellite business to SES Global’s satellite fleet that might have gone elsewhere.

That reasoning has not yet persuaded some SES investors. The company’s stock, traded on the Paris-based Euronext market, has been under pressure in recent months mainly because its overall profit margin will be lower than in previous years after accounting for the new services businesses.

Comments: pdeselding@compuserve.com