An $8bln deal launches a poor man’s SpaceX
RPT-BREAKINGVIEWS-An $8bln deal launches a poor man’s SpaceX The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Robert Cyran
NEW YORK, June 29 (Reuters Breakingviews) - David’s fight against Goliath had nothing on Rocket Lab’s RKLB.O new mission. The space-launch vehicle and satellite maker on Monday agreed to acquire Iridium Communications IRDM.O in a deal valued at $8 billion, including debt. They say they’re creating a vertically integrated, top-tier industry powerhouse that can boldly go into vast new markets. Problem is, Rocket Lab is worth about $55 billion. Elon Musk’s SpaceX SPCX.O already brings together spaceships and satellites, and at $2 trillion exerts a hard-to-escape gravity.
Rocket Lab is growing quickly, and Iridium throws off cash. Combine the two, and the result should be a financially stronger whole, with profit from the seller’s steady, space-based communications business helping offset the buyer’s red ink from launch operations. The price is high, though.
Iridium should produce around $225 million of operating profit next year, according to analyst estimates collected by LSEG. Taxed, that implies a mere 2.5% return on the deal’s price tag. The timing is also tricky: Iridium’s shares have gone into orbit of late, nearly tripling from their nadir in 2025.
Synergies should provide some uplift. Rocket Lab provided no estimates for profit boosts, but it may be able to produce Iridium’s future satellites in its own factories, and launch them into orbit. Given the seller’s uneven history, from its founding in the 1980s through to a 1999 bankruptcy and beyond, this integration could help it finally live up to lofty expectations.
The problem is the astronomical difference in scale between these companies and Musk’s giant. Estimated 2027 revenue for the merging firms is a bit over $2 billion. At SpaceX, the figure is 30 times larger, after years of practically monopolizing global launch volumes, and rapid growth in its Starlink communications network.
Worse yet, technology behemoth Amazon.com AMZN.O is rapidly adding satellites to its rival network, with plans to put more than 3,000 into orbit. That’s over 40 times Iridium's total. Bigger constellations tend to be more useful and Amazon’s network can benefit from onboarding the company’s vast internal traffic.
All of that is before even considering China’s well-underway space craze, with at least two giant satellite networks being built. Europe doesn’t want to be left behind either. Rocket Lab’s deal may be sensible, but it’s a small creature in an industry headed for a clash of titans.
Follow Robert Cyran on Bluesky.
CONTEXT NEWS
Rocket Lab said on June 29 that it had agreed to buy Iridium Communications in an $8 billion deal including debt. The acquirer will pay $54 a share in cash and stock, a 24% premium to where Iridium’s shares closed on June 26, the last day of trading before the deal was announced.
Rocket Lab produces space-launch vehicles and manufactures satellites. Iridium provides communication services via satellite to more than 2.5 million subscribers.
Deutsche Bank, Wells Fargo and PJT Partners provided financial advice to Rocket Lab. Evercore served as advisor to Iridium.
(Editing by Jonathan Guilford; Production by Pranav Kiran)
((For previous columns by the author, Reuters customers can click on CYRAN/robert.cyran@thomsonreuters.com; Reuters Messaging: robert.cyran.thomsonreuters.com@reuters.net))