Harmonic makes video infrastructure consolidation play with Omneon acquisition

US-based video solutions provider Harmonic has snapped up privately-held video production and playout solutions firm Omneon for an enterprise value of US$274m.
The consideration will be paid via a mix of cash and shares, with Harmonic issuing…

US-based video solutions provider Harmonic has snapped up privately-held video production and playout solutions firm Omneon for an enterprise value of US$274m.

The consideration will be paid via a mix of cash and shares, with Harmonic issuing approximately 17.1 million shares to Omneon’s shareholders and paying US$158m in cash, net of US$32m of Omneon’s cash and cash equivalents at closing. The purchase price represents a multiple of around 4.5 times Omneon’s 2009 EBITDA.

The selling shareholders comprise a number of technology focused venture capital firms including among others Accel Partners, Norwest venture Partners, Advanced Technology Ventures, INVESCO Private Capital, Meritech Capital and Intel Capital as well as JPMorgan Chase.

“This proposed combination will position Harmonic to become a global leader in video infrastructure for the digital media industry,” said Patrick Harshman, president and CEO of Harmonic. “Media companies are being driven by ever-increasing demand for video content coupled with consumers’ desire to consume video anytime and anywhere. At the same time, the dramatic growth of video delivery over broadband and wireless networks is blurring traditional boundaries between content producers and service providers… we believe that our combined company will be uniquely positioned to capitalise on these trends and to accelerate revenue growth.”

Privately held Omneon is the market leader in playout and production servers used for transmission and production, with a product portfolio focused on video-optimised storage systems and in media management software. Customers include satellite providers such as DISH Network and Sky, networks like Discovery and A&E Television, and broadcasters such as NBC and the BBC.

For the year ended December 31, 2009, Omneon’s revenues were approximately US$105m, of which 67% were outside the United States, with no single customer representing more than 10% of total revenue. Omneon’s gross margin was 58% in 2009.

Harmonic revealed its planned acquisition as part of its Q1 2010 results. The company reported a 25% year-on-year rise in net sales from US$67.8m in Q1 2009 to US$84.8m in 2010, and a net income of US$5.3m compared to a net loss of US$18.8m in Q1 2009.

BofA Merrill Lynch acted as exclusive financial advisor to Harmonic on the transaction.