Belden announced that it has completed the acquisition of the previously announced offer to purchase Grass Valley. When the deal was announced in February 2014, Benden CFO Henk Derksen told equity analysts that the $220m deal would be funded with existing cash.
Grass Valley had approximately $290 million in revenue according to Belden’ press release, so the deal values Grass Valley at 0.75 revenue.
It is believed that the enlarged company will be branded Grass Valley.
According to Belden, the value of the combination of the two companies is clear for both customers and shareholders is clear. The company says that by aligning both resources and strategies, the business will have a broader offering, while realizing the benefits of scale.
Belden also says the combined company “will be able to deliver the ability to simplify the purchasing and management of highly complex infrastructures.”
Belden says acquisition of Grass Valley will be immediately accretive to adjusted earnings per share with an estimated impact of approximately $0.20 in 2014 and $0.50 in 2015.
Much of the increased profitability of the new company is likely to come through synergy savings.
One of the hallmarks and core competencies of the Belden team is the efficient integration of acquired companies into the Belden family, and the associated inculcation with the “Belden Business System, including LEAN enterprise techniques and the Market Delivery System.”
There are many examples of Belden buying underperforming companies and subsequently using its internal processes to achieve strong financial performance and operating return.
Indeed, the company says “there is a significant opportunity in the application of the Belden Business System” in the case of Grass Valley
Derksen told analysts at the time of the announcement that Belden plans “to invest approximately $25 million during the first 12 months of integration largely through restructuring efforts to capture the value of the combined company. The strategic actions will include cost actualization, manufacturing footprint and leveraging a combined sales and marketing function and the implementation of lean principles.”
At same time Belden CEO John Stroup said “the result of the integration is unlikely to include meaningful reductions in R&D investment. However, I think there’s going to be an opportunity for Miranda to throttle back on some investments where Grass Valley’s stronger and for Grass Valley to throttle back on opportunities where Miranda’s stronger. Manufacturing is a clear opportunity. Today, Grass Valley outsources a lot of their manufacturing. We think there’s an opportunity for us to leverage our existing fixed cost structure, absorb that manufacturing. So that’s a clear opportunity to create value in the combined business and there’s clearly an opportunity to leverage our global sales force. Both of us at 200 and 300 million respectively, have created a global sales force calling on the same customers and we see a clear opportunity to improve our efficiency there. So the assumptions that we have in place include manufacturing cost synergies as well as the opportunity to leverage the combined sales organization, both in terms of cost and revenue.”
The following slides show the strategic rationale for the Miranda – Grass Valley merger, as explained by Belden in February 2014.
Given that it is believed that the combined company will be branded as Grass Valley, the deal marks a new beginning rather than the end of the road for the formidable broadcast brand.
Prior to officially becoming part of Belden, what is now Grass Valley has been through a number of strategic changes in the last 10-15 years.
This started in December 2000 when Thomson purchased Philips Professional, which at that time had revenue of approximately 250m Euros, and employed 1,050 people. Philips products, which included cameras, film imaging, signal processing, media networking & control, and systems integration services, became part of Thomson Multimedia.
After the Philips acquisition, the combined company, which was renamed Thomson Multimedia, had combined revenue of approximately 366m Euros.
In 2001, Thomson bought Grass Valley in 2001 for $172m. At that time, Grass Valley had revenues of about $200m.
Technicolor then went on a buying spree, acquiring multiple companies that were ultimately folded into the Grass Valley brand.
Thomson added to its Grass Valley holdings with the 2005 acquisition Canopus for more than $100m.
By the late 2000s Thomson – which had by this time changed its name to Technicolor – put Grass Valley on the block, initially with what has been described as a very high price tag.
After several rumored bids, and more than a year on the block Technicolor sold what is now Grass Valley to Francisco Partners, a San Francisco – based private equity firm.
Technicolor retained other parts of the business, including transmitters and head-end equipment, and later sold-off these assets in two separate transactions.
Grass Valley is one of the industry’s great companies and I am sure that the people there are happy to finally have resolved their fate. Let’s hope they can now focus on making great products – and of course money for their new owners.
Press Release: Belden Announces Successful Completion of Grass Valley Acquisition
Press Release: Technicolor to sell its Broadcast Services activity to Ericsson
© Devoncroft Partners 2009 – 2014. All Rights Reserved.