Rocket Lab To Acquire Iridium In A Bid To Challenge SpaceX

Rocket Lab will acquire Iridium Communications for $8 billion in a cash-and-stock deal, putting it in a position to compete with Elon Musk's SpaceX via the satellite operator's fleet and wireless resources.

Under the terms of the agreement, the shares of Iridium will be valued at $54 apiece. Iridium's stock ended at $43.52 last week and has been in the green lately as investors are hopeful about the value of its spectrum holdings, the Wall Street Journal reported.

The deal continues a wave of consolidation in the sector, Tech Crunch reported. SpaceX's popularity among consumers and government customers has put pressure on rivals, prompting mergers. Globalstar agreed to an acquisition by Amazon. SpaceX itself bought spectrum holdings from Echostar.

In recent months, Iridium has faced questions about the threat the Elon Musk-owned rocket maker poses to its business.

The deal would merge Rocket Lab's “leading launch capabilities and satellite manufacturing with Iridium's global satellite communications network, spectrum, and 500-plus strong partner ecosystem to create a competitive, vertically-integrated space company that designs, builds, launches, and operates its own constellations, delivering critical communications capability to millions of users worldwide,” the company said in a release.

Rocket Lab will build upon Iridium's network to “scale into untapped markets and pioneer new space-based services”. It will gain an immediate foothold in space-based applications, such as both proprietary and standards-based satellite Internet of Things (IoT), critical safety-of-life services and direct-to-device (D2D), creating a formidable presence in the telecom market.  

Iridium currently operates a 66-satellite constellation in low-Earth orbit. The spectrum rights it controls to connect handsets and other devices with its satellites can be used globally.

Rocket Lab is developing the Neutron reusable rocket. Once Neutron enters service, Rocket Lab can launch future generations of Iridium satellites through its own rocket rather than buying launch services from other providers, as per 24/7 Wall Street.

The ability to keep launches in-house will reduce Rocket Lab's expenses across the satellite replacement cycle and give it more control over scheduling and deployment. SpaceX followed the same strategy with Starlink and Falcon.

Rocket Lab has been on a buying spree this year. In May, the company acquired space robotics company Motiv. It bought Mynaric, a laser communications provider, in April. In February, Rocket Lab purchased a precision component manufacturer. The company acquired Geost, a optical sensor defense contractor, last year.