US video delivery infrastructure provider Harmonic has made a binding offer to buy its smaller French peer Thomson Video Networks in a US$90m deal. The acquisition builds scale and also forms the industry’s largest video-focused R&D, service and support teams.
US video delivery infrastructure provider Harmonic (NASDAQ:HLIT) has made a binding offer to buy its smaller French peer Thomson Video Networks (TVN) in a US$90m deal.
It is acquiring all of private equity-backed TVN for about US$75m in cash and up to US$15m in post-closing adjustments, boosting Harmonic’s regional presence in EMEA, APAC and LATAM.
The companies, both specialists in providing content and service providers with advanced video compression solutions, have less than 50% customer overlap between them. They said the combination would build scale and also form the industry’s largest video-focused R&D, service and support teams.
Patrick Harshman, Harmonic’s CEO, said: “The combined product portfolios, R&D teams and global sales and service personnel would allow us to accelerate innovation for our customers while leveraging greater scale to drive operational efficiencies.
“At a time of great change for video content and service providers, the proposed transaction would improve Harmonic’s position as an exceptionally reliable source of innovative video technology that enables delivery and monetisation of amazing new video experiences for the consumer.”
Harmonic’s strategy in recent years to focus on areas in which it is the market leader, such as video production and playout, video processing and cable edge products, saw it offload its cable access business in 2013.
In 2010, the group bought privately held video production and playout solutions firm Omneon for an enterprise value of US$273m.
Harmonic’s latest acquisition will be partly funded by a US$125m convertible bond due 2020. The initial purchaser of the notes will have 30 days to buy an additional US$18.75m aggregate principal amount to cover over-allotments.
The US firm expects to use up to US$70m of the bond’s proceeds to fund a portion of its acquisition costs, and about US$25m to buy common shares from purchasers of the notes in privately negotiated transactions.
Its offer for TVN takes the form of a “put” option agreement, subject to regulatory and shareholder approvals following a consultation process with the target’s employee works council in France.
TVN was spun out French set top box maker Technicolor in 2011 when it was sold to France-based capital development fund FCDE.
Following a competitive process run by DC Advisory, FCDE sold a 49% stake in the group last year to Rothschild investment fund Winch Capital 3. Venture capitalists CM-CIC Private Debt and TVN’s executive team also acquired a stake.
TVN reported €71m (US$77.3m) in revenue in fiscal 2014.
The combined company will serve more than 5,000 content and service providers across 100 countries. It would have a video-focused R&D organisation of more than 600 engineers, a 300+ global service organisation, and over 300 channel partners.
LD&A Jupiter advised Harmonic on the proposed acquisition.