SINGAPORE (Mar 28): ST Engineering is acquiring Newtec Group NV, a Belgium-based satellite communications (satcom) company, for 250 million euros ($383 million).
In a Wednesday filing, ST Engineering says the acquisition is complementary and synergistic as it currently offers a suite of satcom solutions to provide seamless global network and bandwidth management with end-to-end integration that addresses the growing needs of enterprise, government, mobility and defence market globally.
With the acquisition of Newtec, the group will be able to add intellectual property, products and market access, meeting demands across the full spectrum of the satcom market. In particular, the enhanced satcom capabilities will allow the group to better participate and lead the advancement of the satcom industry to enable Smart Cities globally.
The businesses when combined, is expected to produce "about $200 million in value creation arising from revenue and cost synergies".
Vincent Chong, President & CEO of ST Engineering, says, “This proposed acquisition expands our satcom business in a meaningful way in an attractive industry that is high-tech and high-growth, driving connectivity advances in a world where 5G and satcom converge.”
“It aligns with our strategy to invest in businesses that help accelerate our growth trajectory, especially in Smart City, to deliver long-term shareholder value,” he adds.
In a morning note, research house UOB KayHian says Newtec Group is a key technology provider in the satellite broadcast segment with ultra-high throughput capabilities.
According to ST Engineering, Newtec was among the first companies to test over the air communication via Low Earth Orbit (LEO) satellites. LEO satellites are expected to take off with the launch of 5,000 satellites in the coming years.
The aim is to provide fibre quality broadband solutions for the mobility segment, including aeronautical applications (inflight connectivity), maritime broadband, connected cars and smart cities.
The acquisition EV/EBITDA multiple is 14.6x 2018's EV/EBITDA and 2.7x sales and is expected to be earnings accretive from the second year.
"We are highly positive on the acquisition and believe that it will provide a substantial leap in ST Engineering's satcom solutions capability and global reach. It will also substantially complement, ST Engineering's existing Satcom, platform, I-Direct," says UOB KayHian.
"We maintain our 'buy' rating on ST Engineering with a target price of $4.06, pending an analysts meeting," adds the research house.
As at 10.49am, shares in ST Engineering are trading at $3.75.