Satellite Firm's Acquisition Boosts Competitiveness

Small-satellite specialist Surrey Satellite Technology Ltd. (SSTL) on Jan. 13 formally became a subsidiary of Astrium Satellites, a division of European aerospace conglomerate EADS, in what SSTL Chairman Sir Martin Sweeting said is a necessary step if the company he founded is to grow.

?SSTL operates in a highly competitive global market,? Sir Martin said in a statement. ?If we are to continue changing the economics of space and provide the innovative solutions our customers demand, we must expand and maintain our R&D [research and development] investment.?

SSTL officials have said the company?s former owner, the University of Surrey, would not be able to keep up with capital requirements as SSTL, once limited to very small satellites whose purpose was to train engineers in satellite manufacturing, now is competing for commercial and government projects worldwide - occasionally against?Astrium.

Astrium is purchasing the 85 percent stake in SSTL held by the University of Surrey, and also the 10 percent share held by Space Exploration Technologies (SpaceX) of the United States. The university is retaining a symbolic ownership stake, with the total sales price?estimated at around 45 million British pounds ($60.6?million).

?This is a great move for both the university and SSTL,? University of Surrey Vice Chancellor Christopher Snowden said in a Jan. 13 statement. ?I believe this deal represents one of the largest cash spin-outs from any U.K. university. It will also allow the company to realize its full potential as a rapidly growing and leading supplier of satellites, whilst the university retains the benefit of close interaction with SSTL and its new partner, EADS Astrium. By retaining a small stake in SSTL, the university shows its commitment to both the future of the company and space research itself.?

Astrium and SSTL officials insist that the sale included provisions that guarantee the continued existence of SSTL as an independent company that will not disappear in the corridors of a corporate owner that is 40 times its size. Astrium and SSTL have given specific assurances to both the university and to the British government as to SSTL?s ongoing independence and brand integrity.

Astrium, which has multiple satellite models and is one of Europe?s two principal satellite prime contractors, counts some 12,000 employees - 3,000 in Britain alone - and reported revenue of 3.5 billion euros ($4.71?billion) in 2007.

SSTL has 300 employees and reported a profit of 3 million pounds on revenue of 45 million pounds in the 12 months ending July 1. Backlog at the time was 48 million pounds.

Sensing the market opportunity, and having been stung by SSTL in several international competitions for small satellites in the past 10 years, Astrium has developed its own?small satellite product line and has bested SSTL to win several recent contracts.

Sir Martin has said the political backing given to Astrium by the French government has never been matched by British government support for SSTL in international bidding, and that this has favored Astrium. But Sweeting also said SSTL, as an Astrium division, will have access to capital to enable the company to develop into a more effective competitor, even if it sometimes vies against other Astrium divisions.

SSTL also has been unable to win much business from Europe?s biggest government space contractor, the 18-nation European Space Agency (ESA). In approving Astrium?s purchase of SSTL, the European Commission noted that the new combination will have no material effect on ESA?s competitive landscape because SSTL?s business model does not permit it to divvy up satellite work among contractors in multiple nations. Work-share spreading of this sort, which ESA calls juste retour, or geographic return, is a pillar of ESA contracting.

But in an example of the evolution of the satellite business and of the company in particular, SSTL is bidding to manufacture part of the 30-satellite Galileo navigation constellation as a subcontractor to OHB System of Bremen, Germany. The OHB-led team is competing against a consortium led by Astrium.

A decision on the Galileo satellite construction contract is expected later this year.

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