An $8 billion deal marks another step in the ongoing consolidation of the satellite sector.
Rocket Lab (stock code: RKLB) has reached an agreement to acquire Iridium Communications (stock code: IRDM). This acquisition will grant Rocket Lab control of a satellite fleet and valuable wireless spectrum, positioning it to compete with Space Exploration Technologies Corp. (SpaceX).
Announced on Monday, the cash-and-stock transaction values Iridium at $54 per share, giving the McLean, Virginia-based company an enterprise value of approximately $8 billion. Iridium's shares closed at $43.52 last Friday and have been rising recently, as investors have grown more optimistic about the value of its spectrum holdings.
SpaceX's expanding market share in both consumer and government satellite services has placed significant pressure on rivals, fueling a wave of industry consolidation. In recent months, market observers have expressed concern that SpaceX could disrupt Iridium's core business of providing specialized device connectivity via satellite.
Several established satellite operators have pursued mergers: Globalstar agreed to be acquired by Amazon in April; Luxembourg-based SES completed its purchase of Intelsat last year; and SpaceX itself finalized a deal to acquire spectrum assets from EchoStar.
Rocket Lab stated on Monday that the transaction will combine its rocket launch and satellite manufacturing capabilities with Iridium's global operations and spectrum portfolio. The deal is seen as a key enabler for the company's strategy to build a new, upgraded satellite constellation to eventually replace Iridium's existing network of orbiting satellites.
Iridium currently operates a constellation of 66 satellites in low Earth orbit, providing communication services for various handheld and specialized devices. Industry executives and analysts note that the company's rights to globally harmonized satellite communication spectrum are a highly valuable commercial asset.
Founded in 2006 by CEO Peter Beck, Rocket Lab initially focused on launch services. In recent years, the company has made several acquisitions related to satellite manufacturing and operations.
Rocket Lab's management has previously stated that its long-term goal is to operate its own dedicated satellite constellation, rather than solely providing launch and manufacturing services for external clients.