While Gogo agreed to acquire fellow connectivity specialist Satcom Direct at the end of September, the company’s interest in teaming up with the established player in the business aviation market long pre-dated that.
Gogo has agreed a deal to buy Satcom Direct for $375 million, together with 5 million Gogo shares and potentially up to another $225 million. The companies aim to complete the deal before year-end.
Asked at a press briefing during the NBAA BACE event in Las Vegas on 23 October if the deal was a defensive move in response to the arrival in the aviation connectivity market of the SpaceX Starlink service, Gogo president Sergio Aguirre revealed the company has held a long-term strategic interest in Satcom Direct.
“This is Gogo’s third attempt at seriously considering some type of merger or acquisition of Satcom Direct, and prior to this one, Starlink didn’t exist,” says Aguirre, noting the previous two times had not developed into formal processes.
“This has been something that the market place…they tell us if you guys got together, that would be the best solution for us customers. So this concept of bringing these two companies together is something that made sense, before Starlink came along.
“The reason you guys and many people think it’s a defensive move is it also puts us in a very strong position, but that wasn’t the reason,” he adds. ”The reason was the fundamental issues of business aviation connectivity. The biggest competitor is not Starlink, it’s the ‘do nothing’ people. 70% of business aviation still do not have a broadband solution. That’s what we are going after.”
Satcom Direct chief commercial officer Michael Skov Christensen adds: “There is a lot of consolidation in the industry and it very much looks like they are reactions. But when you go through where these synergies are, you will see that this is not an acquisition to go into a defence for other entrants into the market, this is an acquisition to go full-out offensive for all our customers.”
Executives from both sides point to the complementary nature of the tie-up. Gogo has developed its presence in the air-to-ground network in North America, while Satcom Direct follows a multi-orbit strategy with a global footprint. Both have been working on bringing a low earth orbit (LEO) satellite broadband service via Eutelsat OneWeb network – Gogo through its Galileo service.
“Galileo and LEO technology allows us to now do broadband worldwide and the reason it is such a powerful combination between the two companies is it was going to take us five years to have a sales and support organisation to address those 14,000 aircraft outside of North America,” says Aguirre.
“We have that on day one with an organisation who has a culture of – number one, support the customer. And we have it worldwide now, and they understand satellite communications. So for the customers, it’s like an instantaneous benefit.”
Satcom Direct president Chris Moore believes the agnostic strategy Satcom Direct has followed thus far will remain even with the acquisition.
“That agnostic approach – even in the way you look at how our software plugs into third parties, that’s not going to be discontinued. If anything, I think Gogo acquiring us is a further bolster to that strategy. We believe that’s a massive differentiator where the industry is going.”
Satcom Direct is privately-owned and Moore says the plan was always to build the business up and acquire an exit for the owner. “The owner felt very happy about Gogo buying the business,” he says. ”Obviously it was a founder-based business, and it was very important to them that the customer-centric nature of SD would be maintained.”
“It’s very complementary. There are a lot of opportunities for scale. I think both businesses really want to make sure they create the best thing for both sides, and having that scale ….we’ve got to do that, because our aim is to get 70% of the unconnected, connected.”
