The British government has announced that it has granted initial approval of the proposed acquisition of Inmarsat, a mobile satellite communications company in the U.K., to Viasat, for $7.3 billion. Viasat is an American satellite communications company founded in 1986 and headquartered in Carlsbad, CA. Inmarsat is a British satellite telecom founded in 1979 and headquartered in London.

Both companies are actively engaged in serving the British defense and security industries and each is competing for a share of a $6.9 billion Skynet upgrade project with the British military. That project would replace the ground station for Skynet with new equipment. A merged entity between Viasat and Inmarsat could help improve the outlook for gaining a larger share of the Skynet program.

Viasat announced that it would begin negotiations to acquire Inmarsat in the Fall of 2021. British security regulators took several months to evaluate risk and other considerations in light of newer legislation in the United Kingdom that is intended to block mergers that could threaten the U.K.’s national security interests. Approval based on no threat to national security was one important step to accomplish but there remain others. The timing of this proposed merger may be a factor because it follows two other deals in which a British defense industry firm was acquired by a U.S. company.

The deal must now be evaluated by U.K. regulators to see if a merger would reduce the ability of other companies to compete in the U.K. The idea is to prevent one entity from dominating an industry so completely that it effectively blocks competition. An announcement in this regard is expected shortly.

Inmarsat and Viasat each provide similar services to the aviation, shipping, and military industries in their respective countries. Viasat currently provides encryption services to the U.K. defense industry. Viasat has promised to add jobs and to increase research spending in Britain if the deal is approved. The new combined entity would make its global headquarters in the U.K. while retaining Viasat’s U.S. base of operations. Further announcements are anticipated.