SES S.A. announced an agreement to acquire DRS Global Enterprise Solutions (GES), a US-based subsidiary of Leonardo DRS, for $450m. On completion of the transaction, the GES business will be combined with SES Government Solutions (SES GS), a subsidiary of SES, creating a scaled solutions provider serving the connectivity needs of the US Government.
“This investment reinforces our commitment to provide industry-leading solutions and services for government clients while delivering sustained growth for SES in a high-value segment in which we have a track record of partnership,” said Steve Collar, CEO of SES.
“I have long admired GES and its culture of long-standing relationships built on the delivery of high-performance, reliable, and mission critical connectivity solutions across the US Gov’t.”
“They are a best-in-class solutions provider and the combination with our own solutions will allow SES to serve the US Government with an expanded and enhanced set of advanced connectivity and network solutions leveraging the world’s largest multi-orbit satellite fleet.”
SES to exploit U.S gov’t DRS GES markets
For over 20 years, DRS Global Enterprise Solutions has supported custom end-to-end satellite communications solutions for land, sea, and air operations for the US Government.
The business is a leading gov’t services provider with over $250m of projected annual revenue, relationships with many key agencies, and expertise in delivering integrated satellite-terrestrial solutions notably in enterprise IT management and cyber security.
SES plans to combine GES with SES GS, taking advantage of their shared deep commitment to providing secure, global solutions to unite the advanced multi-orbit satellite networking capabilities of SES GS with GES’s experience in satellite communications integration.
US Government customers will also benefit from technical and commercial simplification, while ensuring continuity of high-performance satellite-enabled solutions.
GES’s understanding of US Government customer needs across a broad suite of applications will further expand market access for O3b mPOWER, SES’s next-generation Medium Earth Orbit (MEO) network, which will begin delivering a compelling combination of low latency, high throughput per terminal, and high flexibility for a range of requirements from end-2022.
SES has also developed intelligent capabilities that enable customers’ networks to operate seamlessly across multiple orbits and terrestrial solutions where the combined SES GS and GES business solutions can leverage a proven expertise in integrating SES’s unique MEO offering with its own global GEO fleet and access to third-party satellites.
SES tipped to grow market revenue
According to Northern Sky Research (July 2021), global industry revenue from government services will experience an almost 4-fold expansion between 2021 and 2030.
That is on the back of increased demand for secure connectivity to support gov’t requirements including intelligence, surveillance, and reconnaissance (ISR), communications on the move and on the pause (COTM/COTP), and morale, welfare, and recreation (MWR).
The investment accelerates SES’s strategy of growing Networks revenue by providing greater access to, and expertise in, important and high-value segments such as Government where SES has grown revenue by around 30% since 2017. SES’s revenue from serving the US Government would double in the size with the combination of GES and SES GS businesses.
The consolidation of GES with SES GS is expected to add $40m of EBITDA and will benefit from the combination of future expansion and $25m of annualised run-rate synergies, including opportunities to enhance existing networks with the SES multi-orbit network.
SES’ acquisition of DRS GES is expected to be earnings and free cash flow per share accretive from Day 1 and funded from existing financial resources. SES remains committed to maintaining a strong balance sheet consistent with investment grade ratios.
For this transaction, SES was advised by Gibson Dunn, Hogan Lovells and SatCom Law. Leonardo and Leonardo DRS were assisted by Morgan Stanley & Co. LLC as the leading financial advisor and by Curtis, Mallet-Prevost, Colt & Mosle as the main legal advisor.