TAMPA, Fla. — A shareholder with more than 7% of SES’ economic interests is calling for reduced state control over the Luxembourg-based satellite operator, arguing that greater independence is needed to tackle mounting challenges.
Hedge fund Appaloosa said in Feb. 27 that the operator’s $3.1 billion plan to buy rival Intelsat, where it holds a similar stake, does not go far enough to address an existential threat from growing competition in a fast-changing market.
Founded by billionaire investor David Tepper, Appaloosa also proposed downsizing and more regularly refreshing the company’s board of directors, along with a structured program to distribute capital to shareholders, including an annual allocation of surplus funds.
SES said it is thoroughly evaluating the proposals and plans to make its recommendation to shareholders later. A spokesperson declined to comment further.
State independence
The Luxembourg government holds a special class of shares (Class B) that gives it 33.33% voting rights despite having only a 16.67% economic interest in the company.
“Perhaps this disparity may have been excused in the past when the satellite industry conducted business as a staid oligopoly of quasi-governmental incumbents shielded from material competitive threats,” Appaloosa said in a news release announcing its proposals.
“In the current context, however, the structure is an antiquated relic that disenfranchises shareholders and discourages investors and customers from taking the Company seriously as an authentic commercial enterprise.”
Appaloosa proposed converting Class B shares into Class A at a rate that would preserve the government’s 16.67% stake in SES.
The hedge fund said the government can instead protect its key interests — keeping SES headquartered there, maintaining fair board representation and ensuring local operations — through targeted changes to the company’s bylaws or a contractual agreement.
“As a result of these measures, the Government’s legitimate concerns can be addressed but its ability to disproportionately influence the Company’s business affairs curtailed,” Appaloosa added.
“Ultimately, modernizing the Company’s capital structure to conform with international standards will contribute to SES’ continued viability and inure to the benefit of both public shareholders and the Grand Duchy of Luxembourg.”
Appaloosa’s proposals challenge the government’s role in SES at a time when the operator remains a pillar of Luxembourg’s growing space ambitions
The country also supports broader space initiatives, including its Space Resources initiative, which aims to develop a legal and business framework for asteroid mining and other commercial activities.
Industry challenges
With shares trading well below COVID-era lows amid mounting competition from SpaceX’s Starlink broadband constellation, Appaloosa said SES must shift from a government-affiliated model to a more agile, commercial approach.
While SES maintains a steady financial projections, Moody’s downgraded the operator’s outlook Feb. 18 from stable to negative due to competitive pressures and uncertainty around future revenues.
A week later, SES recorded 2 billion euros ($2 billion) in revenue for 2024, down 0.9% year-on-year but at the top end of its financial outlook.
Adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization, increased 0.9% to 1.03 billion euros.
Looking ahead, SES anticipates stable revenue and adjusted EBITDA for 2025, with the Intelsat acquisition expected to close in the second half of the year.
