Rocket Lab to Acquire Iridium in $8 Billion Deal, Accelerating Expansion Beyond Rocket Launches

Rocket Lab said Thursday it struck an agreement to acquire Iridium Communications in a $8 billion deal that would more than triple Rocket Lab’s revenue by adding one of the industry’s oldest and largest satellite operators to its space systems.

The acquisition marks an ambition leap for Rocket Lab, which up until now has focused primarily on its business of launching rockets for customers but has been aggressively expanding its space systems, which are used in making the satellites themselves. Under the deal, the combination would turn Rocket Lab into more than just a launch provider but also provide a massive satellite network with reliable, ongoing, subscription revenue.

Rocket Lab, until this deal one of the better-known companies for its work launching small payloads aboard its Electron rocket as well as making small satellite components, is taking a big leap to transition into becoming a fully integrated space company with activities across much of the industry. Through the transaction, Rocket Lab aims to cover the space value chain with launch services, satellite design, manufacturing and a satellite communications network business from Iridium. The Iridium stake would be 3-4x larger than Rocket Lab’s existing revenue and, as an operator with revenue that, by and large, depends on recurring service contract revenue, Rocket Lab aims to make its revenue base more stable than the largely event-driven revenue for launches.

“If I’m rocket Lab’s investment bank trying to sell it to an index fund, it was just a rocket launcher business, they also make a small number of satellite parts, and they also have, like, two of the world’s best launch sites,” Rocket Lab chief executive Peter Beck told the New York Times. “Today, not only is that business continuing to grow, but suddenly there’s one of the world’s premier telecommunications service businesses that, because it operates out of low Earth orbit, becomes increasingly more valuable over time.”

Iridium has owned one of the world’s few remaining satellite telephone network operators since 1991, using a constellation of 66 low earth orbit satellites to provide communications. Companies in the aviation, maritime, defense, emergency and remote industrial services use Iridium devices and services to connect where there are not terrestrial networks, which allows Iridium to generate ongoing revenue from a network of subscribers, not just a one-time revenue stream as with launching a rocket into space.

Rocket Lab would combine Iridium Communications business with its own growing suite of space systems – satellite development, in-space hardware and its much larger and more powerful, Neutron rocket which is due in about three years. This combination would enable the company to offer the complete value chain for satellites and communications services in orbit. It’s similar in this sense to the strategies of space companies like SpaceX, that now operate their own satellites in addition to launching others for commercial and government customers.

“This combination catapults us far beyond that,” Beck added in a statement released by Rocket Lab about the pending acquisition. “We will be the premier pure-play integrated launch provider and space systems company that covers, in its entirety, the space value chain.”

The deal makes sense on paper as the pace of competition within commercial rocket startups intensifies and with the increasing opportunities within Earth-orbit data and communication services. “Iridium has a well-established and cash-flowing service business with a global infrastructure that complements our satellite manufacturing and launch expertise, creating significant synergies and a fully integrated space capability,” the statement from Rocket Lab added. “The addition of Iridium’s predictable service revenue stream significantly diversifies Rocket Lab’s business and business model, providing greater revenue predictability and stability.”