OHB, feeling undervalued, going private in deal with KKR

BREMEN, Germany — The chief executive of European space company OHB says taking the company private is necessary in a time when small companies, specifically space companies, are undervalued in public markets.

OHB announced a deal with investment company KKR in August whereby KKR would voluntarily offer to purchase shares floating on the public market and not held by OHB’s majority owners, the Fuchs family. KKR offered 44 euros ($47.70) a share. KKR said Nov. 8 that, at the end of the tender offer Nov. 3, 77.5% of the shares on the open market had been sold to KKR, with about 94% of all shares now owned by KKR or the Fuchs family.

While the agreement also included additional investment by KKR into OHB, that was not the primary purpose of the deal, explained Marco Fuchs, chief executive of OHB, during a panel at Space Tech Expo Europe Nov. 14.

“It’s not about having KKR investing in OHB. It’s about going private from the stock market,” he said. “We decided we did not want to continue as a listed company.”

He said companies like OHB aren’t valued highly on the public market. The company has a current market cap of about 725 million euros, but that reflects a 39% increase from its average in the three months before the KKR offer. The company reported Nov. 9 revenues of 737 million euros in the first nine months of the year, with earnings before interest, taxes, depreciation and amortization (EBITDA) of 64.1 million euros in the period.

“I believe small caps, microcaps are structurally undervalued. There’s very little liquidity in the market. I don’t believe that’s the right format for OHB to be able to grow,” he said. By going private, the goal is “making OHB hopefully a more agile and more dynamic company.”

He said the challenge facing smaller public companies is particularly acute for those in the space industry. “I don’t believe in public markets for the time being in space,” he concluded, citing the example of space companies that went public through special purpose acquisition companies (SPACs) in recent years, only to lose much of their value and, in the case of Virgin Orbit, go bankrupt.

“We saw all these SPACs fail. We see very different valuations out there. So, it’s not a good place to be, in the public market, especially in the core business model of doing space projects,” he said. “It’s not exactly what capital markets appreciate.”

In an earlier session at the conference, Walther Pelzer, director-general of the German Space Agency at DLR, was asked about KKR’s deal with OHB. He took the view that a large investor deciding to take a stake in OHB was a good sign for the space industry generally without specifically endorsing the deal.

“It shows that space because a global business, that private investors become more and more relevant,” he said. “From this point of view, I’m happy for that.”

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