SANTA FE, N.M. — Swedish space company ÅAC Microtec announced Dec. 22 it plans to acquire Scottish cubesat manufacturer Clyde Space, creating what the companies believe will be a dominant force in a growing sector of the industry.

Under the deal, ÅAC Microtec will purchase Clyde Space for nearly 30.5 million shares and £2 million ($2.7 million) in cash, for a total value of $35.3 million. The purchase is scheduled to close in late January, after a vote by ÅAC Microtec’s shareholders.

The acquisition will create a company with more than 100 employees and a combined $7 million in revenue in the first three quarters of 2017. However, the firms have expectations of significant growth in the next few years given growing demand for cubesats and other small satellites, particularly though proposed communications and imaging constellations.

“We think that we will be able to dominate the smallsat platform supply in the 1 to 50 kilogram class,” said Alfonso Barreiro, chief executive of ÅAC Microtec, in a conference call about the deal Dec. 22. “By ‘dominate’ we mean that we will be the leader in this sector. We would provide most of the missions in this sector.”

Clyde Space, founded by Craig Clark in 2005, initially focused on the production of components for use on cubesats, but has since expanded its work to full development of cubesats as well as ancillary services, such as arranging launches of such satellites and providing ground stations.

ÅAC Microtec was also founded in 2005, but only more recently focused on space products, such as smallsat components and a spacecraft bus called InnoSat developed with OHB Sweden, the Swedish subsidiary of Germany’s OHB. The InnoSat bus is designed for smallsat missions weighing about 40 kilograms.

The combined company, executives said, would be able to merge their complementary strengths to better serve what they perceive as a growing demand for small satellites. “Having a larger crew of development engineers is going to be critical to accelerate our production of new products,” said Clark, chief executive of Clyde Space. “There will be a lot of cross-pollination of different development capabilities and ideas from both sides.”

Those combined capabilities will be able to serve the demand for satellite constellations predicted by a number of industry forecasts. Clark, speaking at a Royal Aeronautical Society conference in London in November, said that supporting development of such constellations had become a priority at the company, but dropped no hints of an impending sale.

“Because of the volume of spacecraft that are coming through, we have to invest in things for manufacturing and test” of spacecraft, he said. “One of the biggest challenges is not the technology, it’s the ability to actually push through these spacecraft.”

In the conference call, Clark said another advantage of the deal is to give Clyde Space access to ÅAC Microtec’s sales capabilities, including offices in the United States and Asia. “About 60 percent of our revenue [last year] was from North America, and we don’t have a presence in the U.S.,” he said. “By tapping into the capabilities and the presence ÅAC has, we’ll be able to grow our presence in the U.S. and our revenues from the U.S.”

Barreiro said ÅAC Microtec doesn’t give formal revenue projections, but expected significant growth in the next few years. The combined company, he said, is projected to have about 100 million Swedish krona ($12 million) in revenue for 2018. “We think ’19 would be a much bigger year, probably, and ’20 again a much bigger year, but we’re not ready to give specific figures,” he said.

The acquisition will give the shareholders in Clyde Space, primarily Clark and two investor groups, a 49 percent stake in ÅAC Microtec. Clark will have a position on the management team of ÅAC Microtec while Will Whitehorn, chairman of the board of Clyde Space and a former president of Virgin Galactic, will have a board seat at ÅAC Microtec.

ÅAC Microtec and Clyde Space will initially work independently, Barreiro said, as they study how to best combine their operations into a single venture. “The idea is to have functionally one company in a few months’ time,” he said. The company will also retain for now both the ÅAC Microtec and Clyde Space brands. “We believe that both brands have value, and we’ll have to see in the future what our brand name will be,” he said.

Jeff Foust writes about space policy, commercial space, and related topics for SpaceNews. He earned a Ph.D. in planetary sciences from the Massachusetts Institute of Technology and a bachelor’s degree with honors in geophysics and planetary science...