RKLB Wants To Own More Than Rockets – Why It’s Spending $8B On Iridium

• Rocket Lab said the acquisition will combine its launch and satellite manufacturing capabilities with Iridium’s global satellite communications network and L-band spectrum.
• The company added that this deal will create a vertically integrated space company that designs, builds, launches and operates its own satellite constellations.
• Rocket Lab also said owning Iridium’s network is expected to eliminate third-party launch costs for future constellation deployments and replenishment.

Rocket Lab Corp. (RKLB) on Monday announced plans to acquire Iridium Communications Inc. (IRDM) in a cash and stock deal as it looks to unlock synergies of vertical integration.

Rocket Lab stated that its deal represents an enterprise value for Iridium of approximately $8 billion.

Rocket Lab shares were up over 11% in Monday’s pre-market trade, while Iridium shares gained over 21%. RKLB was among the top trending tickers on Stocktwits at the time of writing.

Why RKLB Wants IRDM

Rocket Lab said the acquisition will combine its launch and satellite manufacturing capabilities with Iridium’s global satellite communications network and L-band spectrum, creating a vertically integrated space company that designs, builds, launches and operates its own satellite constellations.

The company said the deal gives it an immediate foothold in space-based applications, including satellite internet of things, direct-to-device communications, positioning, navigation and timing services, while adding a recurring revenue business.

“By marrying Iridium’s deep heritage, trusted infrastructure, and highly sought-after spectrum with Rocket Lab’s extensive and proven launch and manufacturing capabilities, we have the capability to unlock entirely new markets,” said Rocket Lab CEO Peter Beck.

Rocket Lab also said owning Iridium’s network is expected to eliminate third-party launch costs for future constellation deployments and replenishment.

“Rather than simply continuing the Iridium network, Rocket Lab will build upon it to scale into untapped markets and pioneer new space-based services to the benefit of global customers,” Rocket Lab said.

What IRDM Shareholders Will Get

Under the agreement, Iridium shareholders will receive $27 in cash and Rocket Lab shares for each Iridium share they own. The stock portion will be determined by an exchange ratio subject to a collar based on Rocket Lab’s share price.

Rocket Lab will acquire all the outstanding shares of Iridium for $54 in cash and stock, representing a premium of 24% to Friday’s closing price of Iridium shares.

The company said that the transaction has been unanimously approved by the boards of both companies. Rocket Lab added that it has secured commitments for a $3.6 billion bridge loan facility from Deutsche Bank and Wells Fargo to help fund the cash portion of the acquisition.

What Retail Investors Think

Retail sentiment on Stocktwits around Rocket Lab trended in the ‘bullish’ territory at the time of writing.

One bullish user believes the dilution impact of the Iridium deal on Rocket Lab will be moderate.

RKLB stock is up 21% year-to-date, while IRDM stock is up 150%. The Vanguard Total Stock Market Index Fund ETF (VTI) is up 20% over the last 12 months, while the Vanguard Mid-Cap Index Fund ETF (VO) is up 15%.

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