ETCMY Eutelsat Communications SA (PK)

Satellite services company SES SA Thursday said it planned to acquire the 49.5% in O3b Networks Ltd. it doesn't already own for $710 million and would issue shares to fund the transaction.

The move deepens Luxembourg-based SES's bet on the market for beaming high-speed Internet to remote locations.

SES moved to buy all of O3b less than a month ago, paying $20 million to take a controlling stake in the startup by raising its 49.1% investment to 50.5%. It retained a call option to buy the rest which it now is exercising.

SES chief executive Karim Sabbagh said it quickly became apparent buying all of O3b would provide the biggest revenue growth potential. The combination should yield significant cost and commercial synergies, he said in an interview.

To finance the transaction, SES said it had begun a capital raise operation and would issue 39.86 million fiduciary depository receipts, each equivalent to a Class A share, and 19.93 million Class B shares. SES would maintain its investment grade credit rating and its progressive dividend policy, Mr. Sabbagh said.

Plans by O3b to potentially pursue an initial public offering are now off the table, SES said. The company said regulatory approval was expected in the second half of the year.

The deal comes at a time investors have been wary about satellite services companies after SES rivals Inmarsat PLC and Eutelsat Communications SA warned of a sales slowdown. Eutelsat said this month it was reviewing capital expenditure plans.

Mr. Sabbagh said he remained comfortable with SES's outlook and growth plans for O3b, which has 12 high-throughput satellites in orbit and has fully funded plans to build eight more. Four of them are due to be launched in 2018 and the remaining four a year later. The full constellation should generate $32 million to $36 million in sales per spacecraft, SES said.

Buying O3b would allow SES to more easily scale up services and adapt to technical changes market forces may require, Mr. Sabbagh said.

Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

May 26, 2016 13:35 ET (17:35 GMT)

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