Chinese Firm Agrees to Buy Israel's Spacecom for $285 Million

Deal to buy operator of Amos communications satellites likely to face regulatory scrutiny.

Israel Aircraft Industries

Spacecom, the operator of the Amos fleet of communications satellites, said on Wednesday that China’s Beijing Xinwei Technology Group had agreed to buy the company for $285 million, in a deal that is likely to face regulatory hurdles.

The acquisition values Spacecom at a premium of 41% to its average stock price on the Tel Aviv Stock Exchange over the past month. The agreement calls for Beijing Xinwei to take on Spacecom’s 1.478 billion shekels in debt.

Spacecom shares jumped more than 9% on Tuesday, when it first reported talks with an unnamed buyer. But Wednesday they were down 0.7% at 44.08 shekels ($11.71), in spite of the valuation.

Spacecom CEO David Pollack said in a statement that the transaction will give the company room to grow in a challenging market. “The global market for communication satellites is undergoing a consolidation process, enabling the merging companies to improve their competitiveness,” he said.

“Beijing Xinwei is a strategic partner, expert in the field of telecommunication, planning to expand its business in the communication satellites field. The merger will provide the company with financial strength and will enable further development and growth,” he said.

The deal is the latest in a string of Chinese acquisitions in Israel. It follows the Delek Group’s announcement just two days ago that it had reached an agreement to sell its 52.3% controlling stake in insurer Phoenix to China’s Fujian Yango Group for 1.95 billion shekels.

That deal immediately raised concern about a Chinese company managing tens of billions of shekels in Israel pension savings. In the case of Spacecom, Beijing Xinwei, a maker of communications equipment that was formed in 1995 and trades on the Shanghai Stock Exchange, will be in control of a fleet of satellites.

Observers said the deal could meet up with opposition from regulators, including the Communications Ministry. But Pollack said the transaction would be done in accordance with Spacecom’s license terms, which require the satellites be operated from Israel and that the company remain Israeli.

The sale would put Spacecom under the direct control of an Israeli-domiciled company called Big Bird, which is managed by Major General (Res.) Ami Shafran, a former head of the Israel Defense Forces communications branch. Big Bird is 100%-owned by a Luxembourg company, which in turn is owned by Beijing Xinwei.

Observers also pointed to a precedent for foreign control of a key Israeli communications operator: The previous ownership of Partner Communications, Israel’s second-largest cellular company, by Hong Kong-based Hutchison.

Apart from regulatory and shareholder approvals, the acquisition also hinges on the successful launch of Spacecom’s Amos 6 satellite, which the company said is scheduled to take place in the first week of September.

Once the deal is complete, Spacecom will become a private company, though its debentures will continue to be traded on the Tel Aviv Stock Exchange.