US communications technology company Cisco has announced plans to acquire London-based conditional access firm NDS for US$5bn.
The transaction, which includes the assumption of debt and retention-based incentives, has been approved by both boards…
US communications technology company Cisco has announced plans to acquire London-based conditional access firm NDS for US$5bn.
The transaction, which includes the assumption of debt and retention-based incentives, has been approved by both boards but is still subject to regulatory clearance. The companies expect to close the deal in H2 2012.
NDS is being sold by private equity firm Permira, which holds a 51% stake, and media giant News Corp, which holds the remaining 49% share.
Cisco said its acquisition of NDS is broadly in line with the EBITDA multiples paid when the target was delisted in 2009 by Permira and News Corp under a US$1.5bn deal. It added that it is also within the multiple ranges for comparable transactions, including its US$3.4bn deal to acquire video conferencing firm Tandberg in 2009.
According to Cisco, NDS will bolster the offering of its video delivery platform, and will also increase its reach into potentially lucrative emerging markets, such as China and India.
The deal is being financed through overseas cash and a modest amount of equity for employee retention purposes. Cisco ended the last quarter with US$46.7bn cash, cash equivalents and investments.
Cisco CEO John Chambers said in a statement: “Our strategy has always been driven by customer need and on capturing market transitions. Our acquisition of NDS fits squarely into this strategy, enabling content and service providers to deliver new video solutions that leverage the cloud and drive new monetization opportunities and service differentiation.”
In a conference call following the deal’s announcement on 15 March, Chambers said the move reaffirmed Cisco’s commitment to growing through a combination of organic innovation, targeted acquisitions and strategic partnering.
He said: “This is the right deal to do right now. That said, we know more opportunities exist to strengthen our portfolio through acquisitions. We will continue to evaluate other targets that meet our strategic, operational and financial criteria and bring similarly attractive assets to Cisco that NDS does today.”
Upon completion of the deal, NDS’ global operations, which include sites in the UK, Israel, France, India and China, will come under the Cisco Service Provider Video Technology Group (SPVTG) umbrella.
NDS chairman Abe Peled, who will become senior VP and chief strategist for Cisco’s Video & Collaboration Group, of which SPVTG is a part, said the deal will accelerate the development of its video services as demand for them continues to rise.
“NDS’s open software video platform and services are highly complementary to Cisco technology, and together we are uniquely positioned to enable service providers to deliver fresh and exciting multi-screen video services to their customers,” said Peled.
“A key component of NDS’s success has been our open software and services model, working with a wide range of set-top box manufacturers to enable greater choice for our customers; following this acquisition this strategy will continue and expand the choice of hardware solutions available to service providers worldwide.”
Before the acquisition, NDS had been gearing up to raise US$100m in an IPO on the New York Stock Exchange to refinance debt and distribute cash to its shareholders.
Filings submitted to the SEC late last year show Morgan Stanley, Goldman Sachs and JP Morgan had been brought in to act as leads for the potential underwriting, along with Citigroup, Credit Suisse and UBS.
For its acquisition of NDS, Cisco was advised by JPMorgan Chase and Centerview Partners. NDS was advised by Skadden, Arps, Slate, Meagher & Flom LLP. It is understood separate advisers were not appointed for News Corp or Permira.
For the conditional access firm’s 2009 delisting, NDS was advised by Morgan Stanley and Allan & Overy LLP, while NDS’ independent committee of the board of directors was advised by Citigroup and Weil, Gotshal & Manges LLP. News Corp, which prior to the delisting held a 72% stake in NDS but required the investment of Permira in order to take it private, was advised by JP Morgan Securities Inc., Skadden, Arps, Slate, Meagher & Flom LLP and Hogan & Hartson LLP. Permira was advised by Goldman Sachs International, Clifford Chance LLP and Fried, Frank, Harris, Shriver & Jacobson LLP.
