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Europe’s space companies will struggle to grow with public market investors who fail to understand the sector, according to the boss of one of Europe’s leading satellite manufacturers, OHB.

Speaking as OHB sealed a deal with US private equity group KKR to take the family-controlled company private, Marco Fuchs, chief executive, said his company would be better able to exploit the commercialisation of the space sector outside of public markets. 

As a listed company since 2001, investors had failed for more than 20 years to value OHB appropriately, he added. 

“It’s a value creation challenge that we have in front of us now,” he said. “We believe this is the right way to do it. I’m very happy that we were able to find a partner who believes in it . . . Then we can develop it very strongly.”

Global investment in the sector tumbled 58 per cent last year from a record high, as space companies have struggled to win the support of investors because of the poor performance of many start-ups who rushed to list through special purpose acquisition companies in 2021.

Fuchs said investor sentiment had made capital raising difficult in the past two years. Private markets offered better valuation for space companies, because of the “very lumpy nature” of the businesses, he added.

But KKR said it expected the space solutions market to grow and saw “great potential in Europe”. Christian Ollig, KKR partner, said that with additional investments in research and development, “OHB is ideally positioned to achieve long-term sustainable growth”.

Fuchs said after a period away from the glare of public markets, OHB would then consider a return to the stock market, perhaps in five years.

Founded in 1981, OHB is one of Europe’s most established space hardware companies, providing satellites to the EU’s Galileo navigation constellation, components to the Ariane rocket programme and the Juice probe exploring Jupiter’s icy moons. In recent years, it has begun to expand in rocket launch technology through a majority stake in German launcher start-up Rocket Factory Augsburg (RFA), and in ground stations and digital applications for space.

Shares in OHB jumped more than 30 per cent to €42.10 after the announcement. The company reported €32.2mn in earnings in 2022, up 16 per cent since 2017. Before the announcement, its shares had been trading at about €30, adding only about 6 per cent from five years ago.

The Fuchs family is not selling any of its existing shares. KKR is paying €77mn for a 10 per cent stake in OHB through an issue of new shares, and is offering €44 a share for the 30 per cent of the company that the Fuchs family does not own. The offer represents a premium of just over a third to the closing price on Friday and values OHB at about €1bn, including debt.

The private equity group will also invest €30mn through a convertible loan to RFA, which is racing to develop a micro-launcher to tap into a booming satellite launch market. The deal values RFA at about €240mn, enough to get the company to the launch pad in the first half of next year, said its chief executive Stefan Tweraser. 

The Fuchs family is expected to hold a 63.4 per cent stake after completion of the deal, with KKR holding 34.1 per cent. The remaining shares are held by a Fuchs family member outside the family trust.

Fuchs said OHB’s decision to quit the public market was in part driven by the rapidly evolving industry, with companies needing strong balance sheets given the rising risk.

“The whole business model is changing,” he said. “Government agencies used to decide what rockets would be developed and then they would use them. Now the rockets are being developed with private money and government decides which one to use.”

Satellite development was also accelerating fast, he said. Going private would give the company time to focus on running the business without the constant pressure of publishing quarterly reports, he said.