Eutelsat and OneWeb plan to join forces in a bid to take on Musk's company.
The all-stock merger will see Eutelsat issue 230 million new shares and exchange them for all remaining shares of OneWeb. The shareholders of OneWeb and Eutelsat will own half of the firm. OneWeb is valued at $3.4 billion.
The merged entity is expected to bring in over a billion dollars in revenues in the 2022-23 fiscal year.
Eutelsat's D'Hinnin and Berneke will remain as chairman and CEO of the combined entity, while OneWeb's Mittal will become co-chairman.
The Chairman of Eutelsat said that the deal would help the companies.
He said that the combination would accelerate the commercialisation of OneWeb's fleet and enhance the attractiveness of Eutelsat's growth profile.
OneWeb wants to distribute low-earthorbit satellites that will help beam broadband to rural areas. Eutelsat has a fleet of 36 satellites that will be combined with it.
OneWeb has faced difficulties in turning its lofty ambitions into an economic model.
The U.K. government helped the company emerge from Chapter 11 in 2020. $500 million was given to the firm by the government.
The startup had been impacted by a freeze on rocket launches from Russia following Moscow's invasion of Ukraine, and had to turn to SpaceX for help.
Neil Masterson, the CEO of OneWeb, believes the combination with Eutelsat will help turn its fortunes around.
Masterson said that the combination will create a fast growing, well-funded company which will create significant value for their shareholders.
Eutelsat's shares were trading at their lowest level in over a year on Tuesday, with investors unconvinced by the takeover. Eutelsat will temporarily suspend its dividends to focus on OneWeb.
A strict national security clearance process in the U.K. is one of the regulatory approvals that the deal is subject to.
There is a special share held by the U.K. government that gives it a say on national security matters.
The once space venture is being taken over by London. The next leader of the United Kingdom will be decided by members of the Conservative Party.
A premier who can defend Britain's assets from foreign takeovers is likely to be in high demand by the Conservatives.
The sale of Newport Wafer Fab to a Chinese-owned company and the attempted takeover of U.K. chip designer Arm have made the issue of foreign takeovers even more sensitive.
OneWeb will keep its headquarters in the U.K. and will try to get a listing on the London Stock Exchange.
The Chinese state will become a shareholder in Eutelsat as a result of the deal. It could raise eyebrows among the U.S. and Britain.
Last year, Eutelsat took a stake in OneWeb. Japanese tech investor SoftBank is a OneWeb backer.
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