(Bloomberg) -- Viasat Inc. has agreed to purchase Inmarsat Group Holdings Ltd for $4 billion, creating the world's biggest geostationary satellite company.
Carlsbad, California-based Viasat will buy Inmarsat for $850 million in cash and $3.1 billion in stock, and will assume $3.4 billion in debt, according to a statement from the companies Monday.
Bloomberg reported Wednesday that Inmarsat's private equity owners were exploring a sale.
The satellite industry is responding to an unprecedented challenge from Starlink, a fleet of more than 1,500 spacecraft launched in the last few years by Elon Musk's Space Exploration Technology Inc. Starlink and other well-funded low-earth orbit constellations like OneWeb and Amazon.com Inc.'s Project Kuiper promise faster connections from a lower orbit than traditional satellite firms.
The combination of Viasat and Inmarsat will have a fleet of 19 satellites, with 10 more under construction for launch in the next three years. Viasat has already obtained commitments for $2.3 billion of debt, and the deal is expected to close in the second half of next year. It will also issue 46.4 million new shares.
The deal will position the companies for growth in the “very competitive” communications market, Mark Dankberg, executive chairman of Viasat, said in an interview. “We want to be positioned to grow fast.”
Buying Inmarsat will also help Viasat diversify its revenues away from a heavy reliance on the U.S.
Viasat shares traded down 11.9% at 11:16 a.m. in New York, the most in 19 months.
Inmarsat will appoint two members to a newly expanded board of directors, including Andrew Sukawaty, the London-based company's current chairman.
Read More: Musk's Space Push Forces Satellite Rivals Into Merger Mode
Inmarsat's owners, private equity firms Apax Partners LLP and Warburg Pincus LLC and two pension funds, have received hundreds of millions of dollars from the London-based company in delayed spectrum payments, giving them a speedy return on the $3.4 billion they paid for Inmarsat just last year.
The consortium of investors will retain a 37.5% stake in the combined company's equity, according to the statement.
Inmarsat CEO Rajeev Suri has been focused on returning the company to revenue growth after Covid-19 hammered its previously fast-growing in-flight aviation business in 2020. He's recruited new executives in a push to launch a new network using similar technology to Musk's StarLink, and expects full-year sales to beat last year's. He told Bloomberg Television in July these moves could help position the company to participate in dealmaking.
“Inmarsat is in the sweet spot,” Suri said at the time. The company “is likely to have many interested dance partners.”
Other satellite deals are in the offing. French billionaire Patrick Drahi recently offered 3.2 billion euros ($3.7 billion) for France's Eutelsat SA, which the company's board rejected.
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