Gogo Inc., a provider of inflight connectivity for business aircraft, has entered into a definitive agreement to acquire Satcom Direct, a global geostationary (GEO) satellite in-flight connectivity service provider for business aviation. The intention behind the deal, which is expected to close by the end of 2024 (subject to regulatory approvals and customary closing conditions), is to combine the capabilities of the two companies to create what Gogo says would be the only in-flight connectivity provider able to satisfy the performance and cost needs of every segment of the global business aviation and military/government mobility markets.
Under the terms of the agreement, Satcom Direct will receive US$375 million in cash and five million shares of Gogo stock at closing, and up to an additional US$225 million in payments that are conditional on realising certain performance thresholds over the next four years. In 2024, Satcom Direct expects to generate approximately US$485 million in revenue, with EBITDA margins of approximately 17% on a pro forma adjusted basis. Satcom Direct generates approximately 80% of its revenue from the business aviation market, and approximately 20% from the military/government mobility market.
“This transaction accelerates our growth strategies of expanding our total addressable market to include the 14,000 business aircraft outside North America, and delivering solutions that meet the needs of every segment of the BA market,” said Oakleigh Thorne, chairman and CEO of Gogo. “Together, Gogo and Satcom Direct will offer integrated GEO-LEO satellite solutions that provide the highest performance of any satellite solution, along with the world-class customer support that the global heavy jet segment demands. This transaction also uniquely positions us to sell our Galileo LEO solution integrated into Satcom Direct’s GEO and L-band offerings as part of a multi-band, multi-orbit solution for the fast-growing military/government mobility market.”
Gogo has outlined key strategic and financial benefits it expects to gain from the acquisition of Satcom Direct:
- The joint company will establish a unique LEO-GEO-ATG product line for the business aviation market. Gogo expects these offerings will drive revenue growth, from North America ATG (air-to-ground) to meet basic connectivity needs, to integrated multi-orbit LEO-GEO solutions, via combination of Gogo Galileo and Satcom’s Plane Simple GEO solutions.
- The combination of sales and customer support teams will benefit Gogo and Satcom Direct customers worldwide and drive global sales of Gogo Galileo (a LEO system that uses Eutelsat-OneWeb’s constellation).
- The acquisition of Satcom Direct gives Gogo entry into the large and fast-growing military/government mobility vertical. Satcom Direct’s existing products and expertise will immediately diversify Gogo’s revenue, and when combined with Gogo Galileo, create a growth opportunity with unique integrated LEO-GEO products to serve military and government customers.
- The deal will create an expanded platform for the sale and service of new products as technology evolves. A combined installed base of 12,000 unique global customers creates a pathway to sell upgrades to new technologies that can be installed quickly and cost-effectively.
- Complementary OEM and aftermarket positions will drive enhanced recurring revenue with long customer lifetimes. Gogo says the combined company’s technologies will be linefit offerable on more OEM aircraft models than any competitor, and have the largest aftermarket dealer network and fractional, charter and managed fleets relationships in the world.
- The transaction is expected to be immediately accretive to earnings and free cash flow per share, and is expected to generate US$25-30 million in annual run-rate cost synergies in the two years following closing.
- Strengthens financial profile with enhanced scale, attractive margins and greater cash flows. Expected pro forma 2024 revenue of approximately $890 million, adjusted EBITDA margin of approximately 24% and free cash flow of more than $100 million. Including the anticipated launch of Gogo Galileo, the combined company is expected to deliver long-term annual revenue growth in the 10% range, adjusted EBITDA margins in the mid-20% range and significant free cash flow accretion, which will support strategic investments, de-levering and return of capital to shareholders.
