Flotation could value Eutelsat at €3.1bn

Eutelsat Communications on Tuesday launched its long-awaited flotation with a price range of €15.25-€17.75 a share, which could leave the world’s third-largest satellite operator with a market value of more than €3.1bn ($3.7bn).

Hoping to tap into growing investor interest in the satellite sector, Eutelsat’s executive chairman Giuliano Berretta said the group planned to sell new and existing shares worth at least €1.2bn.

Depending on investor interest, this could be increased to €1.6bn. Mr Berretta said the initial public offer would include a capital increase of €860m, which would be used to reduce the €3.2bn in net borrowings.

While debt reduction would be a priority, the chairman and his team refused to rule out the possibility Eutelsat could make some smaller acquisitions to broaden the scope of its satellite coverage.

Until now The group has largely focused on organic growth, and its 23 satellites deliver 1,700 TV television channels to 120m homes around the world. “We don’t exclude external growth,” said Jean-Paul Brillaud, deputy chief executive. “If opportunities present themselves we will examine them.”

The satellite sector seems set for a round of consolidation with plans already under way to create the world’s largest operator through the merger of PanAmSat and Intelsat in the US.

But investor interest in the sector has been particularly driven piqued by the onset of new technology which is prompting far greater demand for satellite capacity. Mr Berretta said he was confident the IPO would give Eutelsat the financial flexibility it needed to invest for the future.

As a result of the fund-raising exercise, Net debt would fall from 5.5 times ebitda to just over 4 times. Mr Berretta also said the group’s order book stood at five times last year’s sales of €750m.

Private equity groups Eurazeo, Spectrum Equity Investors, Texas Pacific Group, Cinven and Goldman Sachs Capital Partners currently own 90 per cent of Eutelsat. Eurazeo could raise as much as €343.7m and see its stake fall from 38.8 per cent to 17.7 per cent, if the maximum number of shares is sold. In this case the free float would be about 51 per cent. Deutsche Bank, Goldman Sachs International, Lehman Bros, Merrill Lynch and Morgan Stanley are book runners. The final price will be fixed on October 25, with trading due to begin on October 31.