Archive for the ‘Broadcast Vendor M&A’ Category

Harmonic Announces Binding Offer to Acquire Thomson Video Networks for up to $90 Million

Analysis, Broadcast Vendor M&A | Posted by Joe Zaller
Dec 07 2015

Harmonic announced its intention to acquire Thomson Video Networks (“TVN”), a compression solution provider based in France. Harmonic_Logo

The purchase price of the acquisition is $75 million (USD) in cash, plus up to an additional $15 million in post-closing adjustments.  The transaction is expected to close in Q1 2016.

Thomson-VN_Logo

For 2014 TVN had sales of 71 million (EUR).  At prevailing 2014 exchange rates, this equates to approximately $95 million (USD).  Assuming an enterprise value of $90 million ($75 million at closing plus $15 million), the valuation is slightly more than 1x annual sales.

The “Binding Offer” is structured as a put option for TVN’s shareholders.  A put option gives the holder the right but not the obligation to sell shares to the option writer (in this instance Harmonic).  The “put” option is subject to the selling TVN shareholders’ 60-day consultation process with TVN’s employee works council in France.  Should the TVN shareholders execute the “put” option subsequent to the consultation process, then the parties would immediately execute a formal purchase and sale agreement.

Harmonic does maintain the right to terminate the transaction if the company is unable to raise adequate financing for the transaction (more below).

According to Harmonic’s regulatory filing there may be additional post-closing payments based on TVN’s 2015 revenue and TVN’s 2015 backlog that ships during the first half of 2016.  A review of the regulatory filing also highlights several closing conditions including the requirement of TVN to reacquire its patent portfolio from France Brevets (a third-party patent licensing firm).

TVN has changed ownership several times in the past five years.  TVN was divested by Technicolor in 2011 in a management-led buyout sponsored by Fonds de Consolidation & Développement des Entreprises (FDCE) for a reported price of around $8 million.  When Technicolor announced that it had sold TVN to FDCE in 2009, it said that the company had 525 employees and operated in 15 countries, and that its 2009 revenues was €61m.

Institutional investor Edmon de Rothschild Investment Partners then acquired a 49% stake in TVN in December 2014.  

 

Transaction Financing

In large part to finance the acquisition, Harmonic also announced today its intention to offer $125 million in convertible senior notes due in 2020.  At Harmonic’s election, the notes will be convertible into cash, shares of Harmonic’s common stock, or a combination.  Management expects to use $70 million of the offering to pay a portion of the costs of the TVN acquisition.  Management also intends to use up to $25 million from the offering to repurchase shares of its common stock.

Commenting on the choice of a convertible offering, Harmonic’s CFO Harold Cover highlighted the opportunity to lower the companies cost of capital and maintain an appropriate cash balance for company operations.

 

Transaction Rationale

Harmonic’s press release announcing the deal and subsequent conference call reiterated in several instances how the acquisition of TVN was an acceleration of Harmonic’s existing video strategy.  Harmonic’s CEO Patrick Harshman commented, “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.”  A slide from conference call is also included below as a reference on several key points of the intended combination.

 

Harmonic - Thomson IR Slide

 

Harshman added further emphasis to the regional strength of TVN outside of the US – over 95% of TVN’s revenue profile is outside the US.  During the question and answer session, the Harmonic CEO cited a regional allocation of revenue for TVN of 50% EMEA, 25% APAC, and 25% Americas (with the majority coming from Latin America).  Management believes this regional profile is highly complementary, as there is less than 50% overlap in the respective company’s customer bases.

 

Consolidation Continues in Transcoding, Encoding, and Compression

The acquisition of TVN is the latest in a series of M&A transactions in the compression segment.  Ahead of the recent IBC Show Amazon announced its acquisition of Elemental Technologies and during the exhibition Ericsson announced its acquisition of Envivio.

Harmonic’s intention to buy Thomson Video Networks is the latest in a series of deals related to video compression, transcoding, and multi-screen video delivery.  As broadcasters and media companies scramble to deploy multi-screen services, transcoding is seen by many as a key technology.  As a result, transcoding has also attracted its fair share of financing and M&A activity.  Here’s a quick run-down of some of the recent transcoding deals and related-financial news:

 

 

 

 

 

 

  • In April 2014, Imagine Communications acquired Digital Rapids for an undisclosed amount

 

  • In April 2014, Dalet acquired Amberfin for an undisclosed amount

 

  • In January 2013, Amazon unveiled its “Amazon Elastic Transcoder.” Based on the company’s Amazon Web Services (AWS) cloud computing platform, the Elastic Transcoder the service provides “a highly scalable, easy to use and a cost-effective way for developers and businesses to transcode video files from their source format into versions that will playback on devices like smartphones, tablets and PCs.”

 

  • In August 2012 Brightcove bought Zencoder, a 2-year old start-up with $2m in revenue for $30m, and subsequently launched a cloud based transcoding service at IBC 2012

 

 

 

 

 

 

 

 

 

 

  • RGB Networks bought transcoding vendor Ripcode in 2010

 

 

Related Content:

Press Release: Harmonic Announces Binding Offer to Acquire Thomson Video Networks

Press Release: Thomson Video Networks Receives Harmonic Group’s Acquisition Offer

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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Broadcast Vendor M&A: Ericsson to Acquire Envivio in $125 Million All-Cash Deal

Analysis, Broadcast Vendor M&A, Broadcaster Financial Results, OTT Video | Posted by Joe Zaller
Sep 10 2015

Ericsson_Logo
Ericsson announced it has agreed to acquire Envivio for $4.10 per share, or approximately $125m.

The deal values Envivio, which had revenue and $41.5m for the year ended January 31, 2015, at more than more than double its closing price of $1.90 in yesterday’s trading.

The board of directors of Envivio has unanimously agreed to recommend that Envivio’s stockholders Envivio_Logotender their shares to Ericsson in the tender offer, and a group that collectively owns approximately 34 percent of Envivio’s outstanding common stock, have also expressed support for the deal.

Envivio provides software-based video encoding/transcoding, processing, packaging and ad insertion for broadcasters and pay TV operators.

Ericsson says the deal will “greatly enhance Ericsson’s software video encoding capabilities and its virtualized encoding concept, which enables abstraction of video processing functions from architectural and functional boundaries, enabling the flexibility to use both hardware and software based video compression, as well as any deployment architecture.”  Ericsson also said the deal extend its “leadership position in TV and media as a global end-to-end solution provider, strengthen [its] video compression position with combination of software and hardware encoding, [and] bring deep competence in software-defined and cloud-enabled architectures for video processing, enhancing Ericsson’s virtualized encoding approach.”

Ericsson’s acquisition of Envivio comes just a week after Amazon Web Services announced that it will be acquiring multi-screen technology provider Elemental Technologies.

Last year (at NAB 2014), Ericsson and Elemental jointly announced that Elemental’s video processing software had been “fully integrated into the Ericsson Virtualized Encoding solution.”  At that time, Dr. Giles Wilson, Head of TV Compression for Ericsson, said: “By expanding Ericsson Virtualized Encoding to also support Elemental software encoding, we are enabling TV service providers to efficiently address the growing complexity of multi-screen TV service delivery within a single solution. As providers strive to address consumer demand for TV Anywhere, we are focused on helping them make the right choices with their multi-screen video processing deployments.”

The combination of Elemental and Ericsson technologies were marketed by Ericsson as the SVP 4000 product family, which according to Ericsson’s website is “a server-based encoder [that] uses standard off-the-shelf GPUs to complement its powerful CPUs and hence provide the best encoding performance on a server-based platform.  In this regard it sits alongside the AVP 4000 system encoder, which offers the best encoding performance on a hardware-based platform.”

With Elemental now part of Amazon AWS, Ericsson moved quickly to find a new partner for multi-screen and virtualized encoding, and found a good one in Envivio.

Indeed, the Ericsson’s announcement of the Envivio acquisition specifically mentions that Envivio’s “pure software video processing is available on Intel-based appliances or IT blade servers.”

Interestingly, while the acquisition of Envivio gives Ericsson a good partner for multi-screen delivery, some of Envivio’s technology may overlap with Fabrix Systems, which Ericsson acquired in September 2014 for $95m. At the time of the Fabrix acquisition, Ericsson said Fabrix provides “cloud based scale out storage and computing platform focused on providing a simple, tightly integrated solution optimized for media storage, processing and delivery applications such as cloud DVR and video-on-demand (VOD) expansion.”

Time will tell whether Ericsson believes the technologies acquired from Envivio and Fabrix are complementary or overlapping.

Per Borgklint, Senior Vice President and Head of Business Unit Support Solutions at Ericsson, says: “Our consumer research clearly shows that viewers are demanding TV on their terms on any device, and expecting experiences that continually evolve. We are committed to offering our customers a clear path towards fully agile cloud agnostic platforms that delight TV consumers. I look forward to welcoming the market leader in pure software-defined video encoding, processing, and packaging into Ericsson. The combination will strengthen our encoding position with both custom silicon and pure software encoding, delivering performance and flexibility.”

 

Ericsson’s acquisition of Envivio is the latest in a series of deals related to online video and transcoding. As broadcasters and media companies scramble to deploy multi-screen services, transcoding is seen by many as a key technology.  As a result, transcoding has also attracted its fair share of financing and M&A activity.  Here’s a quick run-down of some of the recent transcoding deals and related-financial news:

 

 

 

 

 

  • In April 2014, Imagine Communications acquired Digital Rapids for an undisclosed amount

 

  • In April 2014, Dalet acquired Amberfin for an undisclosed amount

 

  • In January 2013, Amazon unveiled its “Amazon Elastic Transcoder.” Based on the company’s Amazon Web Services (AWS) cloud computing platform, the Elastic Transcoder the service provides “a highly scalable, easy to use and a cost-effective way for developers and businesses to transcode video files from their source format into versions that will playback on devices like smartphones, tablets and PCs.”

 

  • In August 2012 Brightcove bought Zencoder, a 2-year old start-up with $2m in revenue for $30m, and subsequently launched a cloud based transcoding service at IBC 2012

 

 

 

 

 

 

 

 

 

 

  • RGB Networks bought transcoding vendor Ripcode in 2010

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Related Content:

Press Release: Ericsson announces agreement to acquire Envivio

Amazon Web Services to Acquire Elemental Technologies for a Reported $500 Million 

Press Release: Elemental Announces Full Integration with Virtualized Encoding Solution

Ericsson Virtualized Encoding (EVE)

Ericsson SVP 4000 Product Family

Press Release: Cloud video transformation accelerated through Ericsson acquisition of Fabrix Systems

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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New Devoncroft Report Available for Download: IBC 2015 – Observations & Analysis of the Media Technology Industry

Analysis, broadcast industry technology trends, broadcast industry trends, broadcast technology market research, Broadcast technology vendor financials, Broadcast Vendor Brand Research, Broadcast Vendor M&A, Broadcaster Financial Results, market research, Quarterly Results, technology trends, Top Broadcast Vendor Brands | Posted by Joe Zaller
Sep 04 2015

In preparation for the 2015 IBC Show, Devoncroft Partners has published an analysis of the trends and strategic drivers in the broadcast and media technology sector.

This 90-page report is free. Registration is required.

A link to download this report can be found at the bottom of this page.

 

Included in the analysis are excerpts from:

 

  • The 2015 Big Broadcast Survey (BBS), the largest and most comprehensive study of technology trends, buyer behavior, and vendor brands in the broadcast and media technology sector

 

Devoncroft IBC 2015 Media Technology Analysis

 

The report covers and provides commentary on a the following media technology trends and drivers:

 

Yes, media delivery and consumption has changed… BUT:

  • Importance of industry-specific context when reviewing data points
  • Digital delivery is a cause, not the effect
  • For media technology industry, impact extends far beyond the obvious

 

 

Media business models in transition:

  • So far, media companies have benefited from OTT
  • But if cord cutting accelerates, does OTT enhance or erode profit?
  • Investor concerns have led to value erosion at both commercial and public broadcasters

 

 

Evolution of media business models driving transition of spending priorities:

  • Value to media companies of linear versus digital consumers
    • – New technologies required to monetize digital content
  • Reflected in changing investment patterns
  • Reflected in in-house technology development at media companies
  • Reflected in M&A – Ad Tech / Software
  • Reflected in new service offerings from media companies

 

 

Structural shift in technology spend:

  • Comparison of media technology CAGR 2009-2014
  • Value shift in favor of service revenue
  • Research shows that media technology spending shifts once HD transition is complete

 

 

Impact on technology vendor performance:

  • Spending pause in studio and infrastructure
  • Has spending resumed in delivery and OTT?

 

 

Review of NAB 2015 Strategy Conference:

  • Drivers of technology strategy
  • Insights from broadcaster CTOs, vendor CEOs, service providers

 

 

Review of 2015 Big Broadcast Survey (BBS):

  • Ranking and review of top media technology projects
  • Ranking and review of top media technology trends
  • Review of growth expectations for product categories and geographic regions

 

 

Thoughts on future industry evolution:

  • Where do technology suppliers add value in the future?
  • Timing of next technology transition
  • Impact of Software Defined Networking (SDN)
  • The move away from specialized products and applications
  • Implications for suppliers of media technology and services
  • The next format war – where is future value, and who is battling for dominance

 

 

Research background

 

 

We welcome feedback, comments, and questions on this report.

If you would like to schedule a meeting at the IBC Show, please let us know as soon as possible.

We are in the process of our IBC Show schedule, and have very limited availability remaining.

We hope to see you in Amsterdam.

 

 

Please click here to download a PDF copy (8 MB) IBC Show 2015 – Observations and Analysis of the Media Technology Industry from Devoncroft Partners (registration required).

 

 

Related Content:

Download IBC 2015 Media Technology Industry Analysis from Devoncroft Partners (registration required)

Collaborative Market Sizing Initiative Reveals Structural Shift in Broadcast and Media Technology Industry

2015 Big Broadcast Survey (BBS) Reports Now Available

 

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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Broadcast Vendor M&A: Net Insight Acquires ScheduALL in $14 Million All-Cash Deal

Analysis, Annual Results, broadcast industry trends, broadcast technology market research, Broadcast Vendor M&A | Posted by Joe Zaller
Sep 04 2015

Net Insight announced it has acquired resource scheduling software provider ScheduALL in a $14m all-cash deal.logo-net-insight

The company says the deal will strengthen Net Insight’s “market position in media service and workflow orchestration.” ScheduAll_Logo

Media and workflow orchestration has become an increasingly important (and crowded) area over the past two years, with multiple vendors announcing new initiatives in this area.

This is Net Insight’s first acquisition in more than a decade.  At current exchange rates, the acquisition will consume approximately 40% of Net Insight’s cash balance as of the end of Q2 2015.

For the 2014 financial year, ScheduALL had revenue of $10.6m, approximately 60% of which was recurring. ScheduALL made a profit of $700,000 in 2014.

The implied multiples of the transaction are 1.3x 2014 revenue and 20x 2014 net profit.  In comparison, Net Insight trades in the public markets (as of 9/2) at 1.6x revenue and 25x earnings.  On both measures, the acquisition is accretive.

To put the acquisition’s impact in proper context, consider Net Insight has grown revenues since 2010 by approximately $10 million USD, which is roughly the acquired revenue from ScheduALL.

“This is a perfect match for Net Insight,” said company CEO Fredrik Tumegard. “We are not only executing on our strategy, we are also taking a giant leap towards our vision of creating a unified and global media market place for both service providers and media companies.”

Half of ScheduALL’s revenue in 2014 was from North America.  This will provide greater exposure to the North American market for Net Insight, which generated 44% of its revenue from the Americas (including South America) in fiscal 2014.

Adding to the financial benefits are the straightforward cost synergies from combining duplicative sales and marketing activities including trade shows.  No guidance was provided in the press release on the potential for cost synergies.

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Related Content:

Press Release:  Net Insight Acquires US Software Company ScheduAll

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© Devoncroft Partners 2009-2015. All Rights Reserved.

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Amazon Web Services to Acquire Elemental Technologies for a Reported $500 Million

broadcast technology market research, Broadcast technology vendor financials, Broadcast Vendor M&A | Posted by Joe Zaller
Sep 03 2015

Amazon Web Services, Inc. (AWS) announced it has reached an agreement to acquire Elemental Technologies.

Elemental_Logo

According to a statement from AWS, the deal brings together Elemental’s leading video solutions with the AWS Cloud platform to provide media and entertainment companies with a range of integrated solutions to efficiently and economically scale video infrastructures as the media industry increasingly moves to internet based delivery.

Terms of the acquisition were not disclosed, but several outlets are reporting that the value of the deal was approximately $500 million.Amazon_AWS_Logo

It the rumored $500 million acquisition price is true, it represents a strong valuation for Elemental. For the full year 2014, Elemental had revenue of approximately Elemental had revenue of $49.2 million, according to INC Magazine’s listing of the fastest growing private companies in the United States

In December 2014, Elemental closed a $15m series D funding round, led by led by Australian telco giant, Telstra, who in August 2014 acquired online video platform provider Ooyala for $360m.

According to Crunchbase, Elemental raised a total of roughly $44 million from investors over the years, including venture firms General Catalyst Partners, Voyager Capital, Steamboat Ventures, and Norwest Venture Partners. Others of its investors include the Australian telco Telstra, the European pay TV giant Sky, and the angel investor groups Oregon Angel Fund and Alliance of Angels.

blackman, elemental

Speaking on a panel of industry executives at the 2015 NAB Show, Elemental founder and CEO Sam Blackman said the company had more than $50 million in revenue, had grown its top-line revenue by more than 55% over the past year, and that he would “be disappointed if we didn’t do that again this year.”

Elemental will continue to operate its business under its existing brand, delivering the full range of solutions for pay TV operators, content programmers, broadcasters, governments, and enterprise customers. Elemental will also expand the integration of its offerings with AWS, and through close collaboration with AWS, accelerate the innovation of next-generation services that feature a range of solutions for customers leveraging on-premises assets, hybrid architectures, and cloud.

In a blog post, Blackman said I am thrilled to announce today that Elemental is joining forces with Amazon to accelerate the development and adoption of our software-defined video platform. Elemental’s top core value of Integrity is similar to Amazon’s Leadership Principal ‘Earn Trust of Others.’ Amazon ups the ante on Elemental’s core value of ‘Customer Centrism’ with their ‘Customer Obsession.’ And Elemental’s third core value, ‘Innovation,’ is matched by Amazon’s ‘Invent and Simplify.’ This alignment around the fundamental, intrinsic cultural values shared by our teams ensures that we will do great things together.

Elemental will continue to operate its business under its existing brand, delivering the full range of solutions for pay TV operators, content programmers, broadcasters, governments, and enterprise customers. Elemental will also expand the integration of its offerings with AWS, and through close collaboration with AWS, accelerate the innovation of next-generation services that feature a range of solutions for customers leveraging on-premises assets, hybrid architectures, and cloud.

“The media and entertainment industry is at a unique inflection point, and as a part of Amazon, we will be in an even stronger position to help our customers delight their viewers globally,” said Sam Blackman, co-founder and CEO of Elemental. “We’re thrilled to have Amazon supporting our growth and ongoing commitment to our customers’ success.”

“We’re thrilled to have Amazon supporting our growth and ongoing commitment to our customers’ success.”

“Elemental shares Amazon’s passion for invention and putting the customer first,” said Andy Jassy, Senior Vice President of Amazon Web Services. “Together, we’ll collaborate on deeper technology integrations and new infrastructure offerings so that media and entertainment companies can evolve their hybrid and cloud models as they continue to innovate their services for viewers.”

 

Today’s Elemental announcement is the latest in a series of deals related to online video and transcoding. As broadcasters and media companies scramble to deploy multi-screen services, transcoding is seen by many as a key technology.  As a result, transcoding has also attracted its fair share of financing and M&A activity.  Here’s a quick run-down of some of the recent transcoding deals and related-financial news:

 

 

 

  • In April 2014, Imagine Communications acquired Digital Rapids for an undisclosed amount

 

  • In April 2014, Dalet acquired Amberfin for an undisclosed amount

 

  • In January 2013, Amazon unveiled its “Amazon Elastic Transcoder.” Based on the company’s Amazon Web Services (AWS) cloud computing platform, the Elastic Transcoder the service provides “a highly scalable, easy to use and a cost-effective way for developers and businesses to transcode video files from their source format into versions that will playback on devices like smartphones, tablets and PCs.”

 

  • In August 2012 Brightcove bought Zencoder, a 2-year old start-up with $2m in revenue for $30m, and subsequently launched a cloud based transcoding service at IBC 2012

 

 

 

 

 

 

 

 

 

 

  • RGB Networks bought transcoding vendor Ripcode in 2010

 

 

Related Content:

Press Release: Amazon Web Services to Acquire Elemental

TechCrunch Amazon Acquires Elemental Technologies for a Reported $500 Million, In Cash

Elemental Blog: Sam Blackman – Building Earth’s Biggest Video Infrastructure!

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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Broadcast Vendor M&A: ARRIS Buys Pace for $2.1 Billion

Analysis, Broadcast technology vendor financials, Broadcast Vendor M&A, Quarterly Results, SEC Filings | Posted by Joe Zaller
Apr 22 2015

In the latest round of media technology consolidation ARRIS announced  it will acquire Pace for $2.1 billion in stock and cash.

ARRIS is financing the deal with just $55 million in cash.  The remaining $2.05 billion comes from a new incremental $800m credit facility underwritten by Bank of America Merrill Lynch, and $1.455 billion worth of newly issued ARRIS shares.

The transaction will result in the formation of “New ARRIS,” which is expected to be listed on the NASDAQ stock exchange under the ticker ARRIS.

Full details of the transaction are available in the Agreement and Plan of Merger file with the SEC.

In a presentation to investors, ARRIS provided the following graphical description of the post-closing structure of New ARRIS:

ARRIS Acquires Pace -- New Arris Post-Closing Structure

 

The deal comes just over two years since ARRIS paid $2.2 billion to acquire the Motorola Home business from Google and catapulted itself to global leader status in the process.

According to the company, the deal “significantly enhances ARRIS international presence, provides large scale entry into satellite segment, [and a] broader product portfolio in equipment, software and services.”

In a letter to employees, ARRIS chairman & CEO said the acquisition of Pace “opens the door for ARRIS’s next phase of growth – through a broader geographic and customer footprint, newly combined complementary product offerings, and enhanced scale. It will provide us with a large-scale entry into the satellite segment. By adding Pace’s innovation and talent, we can further broaden our product portfolio in equipment, software, and services. We will also benefit from Pace’s strong presence in Latin America – one of our industry’s highest growth regions – opening up new global opportunities.”

ARRIS described the Pace product portfolio in the chart below:

ARRIS Acquires Pace -- Pace Product Portfolio

 

The acquisition of Pace gives ARRIS a stronger position in the set-top box business, at the same time as Cisco is being urged by investors to exit from its set-top box unit.  For the first six months if its 2015 fiscal year, revenue in Cisco’s “Service Provider Video” business, which includes STBs decreased by more than 15% versus the same period last year.

“This transaction is another example of ARRIS’s ongoing strategy of investing in the right opportunities to position our company for growth. Adding Pace’s talent, products and diverse customer base will provide ARRIS with a large scale entry into the satellite segment, broaden our portfolio and expand our global presence. We expect this merger will enable ARRIS to increase its speed of innovation. We believe this is a tremendous opportunity for ARRIS and our customers, employees, shareholders and partners around the world as we collaborate to invent the future,” said  Stanzione.

“Pace plc is a great company with a strong track record of pioneering innovation and excellent customer service. Through a combination of organic development and acquisitions, Pace has grown to be a leading technology solutions provider to the PayTV and Broadband industries serving cable, satellite and telco customers across the globe. Over the last three years, Mike Pulli and the wider Pace team have successfully executed against our strategic plan to develop Pace into a more distinctive, profitable and cash generative company, creating significant value for shareholders.

“The Pace Directors believe that ARRIS’s offer recognises this value and also gives our shareholders the opportunity to share in the future success of the combined group. While we believe that Pace is strongly positioned to continue to execute its strategy in the medium and long term, we believe that the combination of the complementary ARRIS and Pace businesses will create a platform for future growth above and beyond our standalone potential. We believe this is a great fit for both companies, our employees, customers and trading partners,” said Allan Leighton, Chairman of Pace.

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Related Content:

Press Release: ARRIS to Acquire Pace plc for $2.1 Billion in Stock and Cash

ARRIS-PACE AGREEMENT AND PLAN OF MERGER

Investor Presentation — ARRIS TO ACQUIRE PACE PLC

ARRIS Employee Letter

Arris-Pace Merger Credit Agreement

Reuters: Arris to buy British set-top box maker Pace in $2.1 billion deal

Reuters — Analysis: Some Cisco investors urge an exit from set-top box unit

Press Release: ARRIS Acquires Motorola Home: Creates Premier Video Delivery and Broadband Technology Company

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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Industry Thought Leaders to Discuss “Shifting Media Economics: Impact on Strategy, Finance, and Technology” at 2015 NAB Show

Analysis, broadcast industry technology trends, broadcast technology market research, Broadcast technology vendor financials, Broadcast Vendor M&A, Conference Sessions, Online Video, OTT Video | Posted by Joe Zaller
Apr 09 2015

Whether you are a supplier, buyer, or investor in the media technology sector, you won’t want to miss the fourth annual NAB Show event co-produced by Devoncroft Partners and the organizers of the NAB Show.

 

NAB Devoncroft 2015 Shifting Media Economics Session Announcement

 

Now part of the NAB 2015 Media Finance and Investor Conference, “Shifting Media Economics: Impact on Strategy, Finance, and Technology,” will be held on Sunday April 12, 2015 in room N235 of the Las Vegas Convention Center.

Designed to be a thought-provoking kickoff to the 2015 NAB Show, this half-day conference examines the “the business of the media business” from the perspective of all levels of the media value chain. It includes panel discussions featuring C-level executives from leading broadcasters, service providers, technology vendors, and private equity investors. Each group will offer a candid assessment of how their respective business models, operational practices, and strategic decision making have been impacted by the dramatic shift in media industry economics.

The keynote, “The Future of TV. One Man’s Opinion.” will be delivered by Bob Bowman, President, Business & Media of Major League Baseball (MLB), who oversees MLB Advanced Media (MLBAM) and MLB Network.

MLBAM has been involved with several recent high-profile streaming events including WrestleMania 31, the opening day of Major League Baseball, the NCAA March Madness basketball tournament, and the recent launch of HBO Now.  Bowman is scheduled to take the stage just one hour before the highly anticipated season 5 premiere of “Game of Thrones” becomes available via HBO Now.

The conference will also include presentations of the latest market research on industry trends and financial performance.  This includes preliminary excerpts from the Devoncroft Big Broadcast Survey, the industry’s definitive demand-side study of the broadcast and digital media industry; and the 2015 IABM DC Global Market Valuation Report, the industry’s definitive supply-side market sizing report.

In advance of the NAB Show, Devoncroft Partners has published an analysis of the trends and strategic drivers in the broadcast and media technology sector. This report is available to download here (registration required).

This conference is intended for senior executives from technology vendors, end-users, and investment firms in the media technology sector. It provides an excellent opportunity to network with industry executives and the financial community ahead of NAB show commitments.

Approximately 400 executives attended this standing-room only event in 2014. We hope to see you there on Sunday April 12, 2015.

Please note that because this event is part the 2015 NAB Show Media, Finance and Investor Conference, registration is required.

 

An overview of the conference is included below.  Full details are available on the NAB Show website.

 

Shifting Media Economics: Impact on Strategy, Finance, and Technology

 

1:40pm – Welcome and Introductions

Presenter:

  • Peter White, CEO IABM

 

 

1:50pm – Review of Market Developments

Josh Stinehour of Devoncroft will take the podium for his annual (enthusiastic) presentation on developments in the media technology sector.  If you have any final announcements you would like Josh to consider for his presentation, let him know.

Presenter:

  • Joshua Stinehour, Principal Analyst Devoncroft Partners

 

 

2:15pm – The Broadcast & Media Technology Industry in 2015

Devoncroft founder Joe Zaller will present a data-driven overview of the forces bringing dynamic change to the media technology sector in 2015. This will include preliminary results of the 2015 Big Broadcast Survey, the industry’s most comprehensive demand-side study, and observations from the 2015 IABM DC Global Market Valuation Report, the industry’s definitive supply-side market sizing report.

Presenter:

  • Joe Zaller, President Devoncroft Partners

 

 

2:40pm – Business Strategy Perspectives from Industry Executives

CEOs from four of the media and broadcast industry’s largest technology suppliers will debate the most important commercial issues facing the industry, and discuss their strategies to position their companies for success in a rapidly evolving marketplace.  The panelists will also offer opinions on how changes in the business environment are impacting vendors and customers.

Moderator:

  • Joe Zaller, President Devoncroft Partners

 

Panelists:

  • Patrick Harshman: President and Chief Executive Officer, Harmonic, Inc.
  • John Stroup: President, Chief Executive Officer, Belden, Inc.
  • Tim Thorsteinson: Chief Executive Officer, Quantel and Snell
  • Charlie Vogt: Chief Executive Officer, Imagine Communications

 

 

3:20pm – The Broadcast Buyer Perspective on Industry Trends

Senior technology executives from four leading broadcasters will offer informed perspectives on the most significant industry trends affecting technology budgets and the technology purchase decision.  The audience will benefit from an emphasis on the business implications of technology decisions to broadcasters.

Moderator:

  • Joe Zaller, President Devoncroft Partners

 

Panelists:

  • Ken Brady: SVP Media Technology and Operations, Turner Broadcasting Systems
  • Richard Friedel: EVP & General Manager, Fox NE&O
  • Fred Mattocks: GM Media Operations & Technology, Canadian Broadcasting Corporation
  • Bob Ross: SVP East Coast Operations, CBS Broadcasting, Inc.

 

 

4:00pm – The Service Provider Perspective on Industry Trends

A panel of executives from leading media service providers will discuss views on both technology developments and deployment considerations for media organizations.  Discussion topics will include solutions for multi-platform content delivery, the economics of outsourcing, how service providers can leverage their scale to deliver increased performance and agility, and how next-generation data center architecture may impact the media ecosystem.

Moderator:

  • Joe Zaller, President Devoncroft Partners

 

Panelists:

  • Darcy Antonellis: Chief Executive Officer, Vubiquity
  • Anil Jain: SVP & GM Media Group, Brightcove, Inc.
  • Steve Plunkett: Chief Technology Officer, Ericsson Broadcast & Media Services

 

  

4:30pm – The Institutional Investor Perspective on Industry Trends

A panel of leading investment professionals in the media and entertainment sector will offer the audience the institutional investor’s perspective on the industry. The discussion will include the panelists’ intelligence-gathering plans for the NAB Show, views on the trends that are driving investment dollars in the sector, and a review of the characteristics influencing the evaluation of an investment opportunity in the media technology industry.

Moderator:

  • Joshua Stinehour, Principal Analyst Devoncroft Partners

 

Panelists:

  • Chris Kanaley: Vice President, Parallax Capital
  • Nick Lukens: Vice President, Vector Capital
  • Bryce Winkle: Vice President, The Gores Group

 

5:00pm – Keynote: The Future of TV. One Man’s Opinion.


Presenter:

  • Bob Bowman, CEO MLB Advanced Media

 

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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ChyronHego Taken Private by PE Firm, Delisted from NASDAQ

Annual Results, Broadcast technology vendor financials, Broadcast Vendor M&A, Quarterly Results, SEC Filings | Posted by Joe Zaller
Mar 09 2015

ChyronHego LogoVector Capital has completed the previously announced $120m deal to acquire ChyronHego and take it private.

Under the terms of the deal, ChyronHego stockholders will receive $2.82 per share in cash, and ChyronHego common stock has ceased trading on the NASDAQ Stock Exchange.

According the definitive proxy statement, the purchase of ChyronHego will be funded by a combination of equity and debt financing.

Equity financing will be provided by Vector Capital and its affiliates, who have committed to pay approximately $49.3m towards the acquisition, and related expenses.

Debt financing is being provided by Silicon Valley Bank (SVB) and Apollo Investment Corporation (Apollo) in the form of a $50m senior secured five-year term loan, which is expected have interest of “either (i) the Eurodollar Base Rate plus 5.625% (subject to a 1.0% floor with respect to the Eurodollar Base Rate), or (ii) at the Adjusted Base Rate (defined as the highest of (w) 2.75% of (x) the Wall Street Journal Prime Rate and (y) the Federal Funds Rate plus 0.50%) plus 3.875%.”

Separately, SVB and Apollo have also providing a $7m senior secured revolving credit facility that has the same terms as the senior five-year term loan. ChyronHego will use the revolving credit facility for working capital and capital expenditures and other general corporate purposes.

In its last quarter as a public company (Q3 2014), ChyronHego posted a net loss of $2.6m on revenue of $14m.

During the first nine months of 2014, ChryronHego posted a net loss of $2.8m on revenue of $43.3m.

For the trailing twelve months (TTM) ended September 30, 2014, ChyronHego had revenue of $58m, comprised of $27.2m of product revenue and $30.8m of service revenue.

In a securities filing, ChyronHego said it ended 2014 with approximately $5.4m in cash and equivalents; and projected that its revenue for the full year 2014 would be $59m.

“We are delighted to be working with Vector Capital,” said Johan Apel, President and Chief Executive at ChyronHego. “As a private company, ChyronHego will be ideally positioned to reinforce the company’s leadership in news, sports and live production solutions. The Vector team has a strong track record of success in acquiring and operating innovative technology companies, and our partnership with them will enable us to reach new levels of scale, technological capabilities and customer service.”

David Fishman, Managing Director at Vector Capital, who will join ChyronHego’s Board of Directors, said: “We believe that as a private company with Vector’s financial support ChyronHego will be well positioned to capitalize on the significant opportunities in broadcast graphics creation, play-out and real time data visualization. Over time, we are confident the company will be well positioned to capitalize on the exciting trends in the sports, news and live television markets.”

“We welcome ChyronHego to the Vector family,” said Nick Lukens, Vice President at Vector. “We are very excited to roll up our sleeves and get to work with the talented team at ChyronHego. Through our partnership with management, we are committed to strengthening and expanding ChyronHego’s market leading product and service capabilities.”

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Related Content:

Press Release: Vector Capital Completes Acquisition of ChyronHego

Certificate of Merger

ChyronHego Makes Revealing Disclosures About “Going-Private” Transaction

Broadcast Vendor M&A: ChyronHego to be Taken Private by Vector Capital in $114 Million Deal

ChyronHego 8-K: Additional Disclosures Regarding Vector Transactions

ChyronHego: Definitive Proxy Statement on Vector Take-Private Transaction

ChyronHego Investor Presentation March 2014

ChyronHego Investor FAQ and Introduction to Vector Capital

Agreement and Plan of Merger: ChyronHego Corporation, Vector CH Holdings (Cayman), L.P., And CH Merger Sub, Inc.

ChyronHego SEC Filing: Entry into a Material Definitive Agreement with Vector Capital

ChyronHego One Year Stock Price Chart

Broadcast Vendor M&A: Vizrt to be Taken Private in $374 Million All-Cash Deal

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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Thorsteinson Replaces Cross as CEO of Quantel and Snell

Analysis, Broadcast technology vendor financials, Broadcast Vendor M&A, Broadcaster Financial Results | Posted by Joe Zaller
Mar 04 2015

Quantel and Snell announced that Tim Thorsteinson has replaced Ray Cross as CEO, effective immediately.news_Tim_Thorsteinson

According to the company, Thorsteinson “is the ideal individual to lead the next stage in the development of the combined Quantel and Snell.”

Cross, who had been CEO of both Quantel and Snell since March 2014, when it was announced that Quantel had acquired fellow UK-based broadcast technology vendor Snell, a deal that had been long-rumored in the industry, since the two companies already had a common parent, Lloyds Development Capital (LDC), the investment arm of Lloyds Bank.

Previously, Cross had been CEO of Quantel since December 2005.

At the time of the Quantel-Snell deal, the company said in a statement that the combined entity had revenue of more than $170 million and office in 16 locations around the globe, making it one of the larger vendors in the broadcast industry.  The company has not provided an update on its performance since that time.

It will be interesting to see what moves Thorsteinson, a longstanding broadcast industry executive, will make as CEO of Snell and Quantel, companies he has competed against in previous roles.

Thorsteinson is a well-known figure in the broadcast industry having headed-up several of the industry’s largest technology vendors over the past 15 years.

In January 2013, Thorsteinson was named CEO of Grass Valley, replacing Alain Andreoli, who had been appointed by private equity firm Francisco Partners following their 2010 acquisition of Grass Valley from Technicolor.

Just over a year later, Thorsteinson oversaw the $220m sale of Grass Valley to Belden Corporation, who combined it with Miranda, keeping the Grass Valley moniker for the enlarged entity.

Interestingly, Thorsteinson was also involved in the sale of Miranda to Belden.  In April 2012, he appointed a director of Miranda Technologies during the time that activist investor JEC Capital was agitating for a sale of that business.  Three months after Thorsteinson became a director of the company, Belden Corporation acquired Miranda for an enterprise value of $356m.

Thorsteinson was the President of Harris Corporation’s Broadcast Communications Division from 2006-2010.  He was appointed to this role following the $460m purchase by Harris of Leitch Technology Corporation, where Thorsteinson had been CEO since November 2003.

Prior to Leitch, Thorsteinson was CEO of Grass Valley Group, and oversaw the December 2001 sale of Grass Valley Group to Thomson Multimedia for $172m.

“We are delighted to have Tim Thorsteinson join Quantel to continue the company’s transformation. Tim has a proven track record of value creation, and his knowledge and experience are a great fit to grow the combined Quantel and Snell business into a major force in the rapidly changing broadcast industry,” said Chris Hurley, Managing Director Lloyds Development Capital and Quantel Board Director. “I would also like to thank Ray for all his hard work and achievements at Quantel over the past 10 years.”

“I’m very excited to be joining Quantel,” said Thorsteinson. “It is one of the larger independent businesses in our industry, with world class products and a rich history of innovation. I want to build on that tradition to create an organization 100% focused on helping our customers prosper in the media technology world.”

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Related Content:

Press Release: Tim Thorsteinson becomes Quantel CEO

Broadcast Vendor M&A: Quantel Acquires Snell

Press Release: Quantel acquires Snell to create new force in media technology

Quantel – Snell FAQ

Belden Makes it Official – Combination of Grass Valley and Miranda to be Called Grass Valley

Broadcast Vendor M&A: Belden Completes Acquisition of Grass Valley, Will Invest $25 Million in Integration of Combined Business

Broadcast Vendor M&A: Belden Buys Grass Valley for $220 Million

Belden Closes Deal to Acquire Miranda

Thorsteinson Appointed to Miranda’s Board of Directors in Otherwise Uneventful AGM

Miranda Nominates Tim Thorsteinson as Director

Activist Shareholder Drama Continues at Miranda Technologies

Technicolor Receives a Binding Offer from Francisco Partners for Grass Valley Broadcast Business

Press Release: Tim Thorsteinson Named President of Harris Corporation’s Broadcast Communications Division

Press Release: Harris Corporation Completes Acquisition of Leitch Technology

WSJ Article: Thomson Multimedia to Buy Grass Valley for $172 Million

Broadcast Vendor M&A: Belden Buys Grass Valley for $220 Million

Belden’s Acquisition of Miranda to Close on or Before July 27, 2012

TVNewsCheck Article (9-29-2011): Tech One-on-One With Simon Derry — Snell Aims To Master the U.S. Market

Advent Venture and LDC close £72m broadcasting merger

Advent Venture Partners and LDC Complete Their Portfolios Merger – March 9, 2009

Video: Pro-Bel and Snell & Wilcox CEOs Discuss Merger (2009)

Press Release (11-6-2003): Chyron Sells Pro-Bel to LDC

Broadcast Magazine (2002): Snell Secures £22m from Advent

Press Release (2002) Advent Venture Partners invests GBP13m in Snell & Wilcox

Variety Article (7-14-2000): Carlton sells tech arm Quantel to LDC for £51 million 

 

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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ChyronHego Makes Revealing Disclosures About “Going-Private” Transaction

Analysis, Annual Results, Broadcast technology vendor financials, Broadcast Vendor M&A | Posted by Joe Zaller
Feb 27 2015

ChyronHego_Logo

In November 2014 broadcast graphics specialist ChyronHego entered into a definitive agreement to be taken private by Vector Capital in an all-cash deal that valued ChyronHego at an equity value of approximately $114m, or $2.82 per share.

Shortly thereafter, six lawsuits challenging the proposed acquisition of the company were filed in the Supreme Court of the State of New York, which were subsequently consolidated into a single case.

The consolidated case alleges that the company’s directors “breached their fiduciary obligations in connection with their approval of the Merger Agreement by entering into a transaction that is coercive and constitutes an unfair and inequitable subversion of shareholders’ rights, and that the entity defendants aided and abetted those breaches.”

ChyronHego and Vector Capital recently entered into a memorandum of understanding (MOU) with respect to a proposed settlement of case, and agreed to provide more information relating to the proposed deal to take ChyronHego private.

According to a recent filing with securities regulators, ChyronHego has now disclosed additional information regarding the proposed deal, including the following:

  • Beginning in November 2013, ChyronHego’s board authorized ChyronHego’s President and Chief Executive Officer Johan Apel to explore ChyronHego’s strategic alternatives

 

  • ChyronHego and Vector Capital entered into a confidentiality agreement in February 2014

 

  • Discussions on the potential of ChryonHego’s management rolling over equity as part of the transaction did not occur with certain other interested parties.

 

  • During a Special Committee (consisting of Independent ChyronHego Directors) meeting in July 2014, the Company’s bankers were informed “Mr. Apel was not happy being the Chief Executive Officer of a publicly traded company.”

 

  • During the “go-shop period,” ChyronHego executives met with two interested parties, neither of which decided to make an offer

 

  • Additional information was provided on the valuation metrics used in the Company’s analysis of the purchase price offered by Vector.

 

 

Excerpts from ChyronHego Definitive Proxy Statement

The broader proxy statement is a lengthy read covering the historical events leading to the proposed transaction, ChyronHego’s rationale for entering the transaction, and additional information on the perspective of the board and management.

Several excerpts are worth highlighting:

  • Since November 2014, ChyronHego’s investment bankers contacted 85 potential buyers: 20 strategic buyers and 65 private equity buyers. Only nine potential buyers entered into confidentiality agreements to review more detailed materials.  None submitted bids for ChyronHego

 

  • In considering the merger, ChyronHego’s board noted the “significant increase in competition in competition in the broadcast graphics creation, playout and real-time data visualization industry over the past two years, which had led in some instances to pricing pressure and discounting on ChyronHego’s products and services, and consistent competition for clients and customers with other companies, such as Vizrt, that were increasingly well-capitalized.”

 

  • The board had concerns on ChyronHego’s access to capital as a small, public company. “Members of the Board believed, based on their experience with the capital markets, that issuers with small market capitalizations and insignificant levels of coverage by investment analysts generally have a more difficult time raising meaningful amounts capital on terms that are not punitively dilutive to their shareholders.”

 

  • ChyronHego provided the following financial projections to Vector Capital:

 

ChyronHego Projections to Vector

 

  • Financing for the transaction will include a rollover of existing management shares in an aggregate value of $23.3 million, an equity contribution by Vector Capital of $49.3 million, a $50 million senior secured loan, and an up to $7 million of senior secured revolving credit loan.

 

 

Thoughts on Transaction

Taken together the disclosures outline a lengthy and thorough process run by ChyronHego’s board and management to seek a buyer or other strategic alternative for the company.

On the question of valuation, the market has spoken.  As a reference, the transaction values ChyronHego at 19.2X LTM (last twelve months) EBITDA and 1.8x LTM revenue. A review of the public disclosures referenced above offers sensible statements by the board and management on concerns of access to greater resources, competitive positioning, and disadvantages of remaining public.

However, shareholder frustration is understandable given the proposed take-private price per share is lower than the 52-week high stock price.

Moreover, the company had previously communicated growth levels and market sizing estimates inconsistent with observable data points in the broadcast technology sector.

For example, the chart below is from ChyronHego’s March 2014 investor presentation, which was still on the company’s website at the time of writing, implies that company believes its addressable market is more than $1 billion.

 

ChyronHego TAM Estimate from 3-14 Investor Presentation

 

On ChyronHego’s Q2 2014 earnings call, CEO Johan Apel confirmed management’s view that the total addressable market was approximately $1 billion, comprised of $250m of broadcast graphics products, and $750m of services. This reiterated estimates made by previous management about the company’s addressable market on its Q2 2008, Q4 2011, and Q2 2012 earnings calls.

However, it is reasonable to conclude ChyronHego was in the process of communicating updated expectations of growth and market sizing.  To their credit, management had already reversed ground and communicated the need to seek other approaches to generate increased in shareholder value.  This led to a series of M&A transactions responsible for substantial all of ChyronHego’s recent growth.

Shareholders will vote on the proposed take-private deal at a special meeting of the company, which is scheduled to be held on March 6, 2015.

In the third quarter of 2014, ChyronHego posted a net loss of $2.6m on revenue of $14m. During the first nine months of 2014, ChryronHego posted a net loss of $2.8m on revenue of $43.3m.  For the trailing twelve months (TTM) ended September 30, 2014, ChyronHego had revenue of $58m, comprised of $27.2m of product revenue and $30.8m of service revenue

Assuming the transaction closes, it will be interesting to track developments of ChyronHego with its new owners Vector Capital.

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Related Content:

Broadcast Vendor M&A: ChyronHego to be Taken Private by Vector Capital in $114 Million Deal

ChyronHego 8-K: Additional Disclosures Regarding Vector Transactions

ChyronHego: Definitive Proxy Statement on Vector Take-Private Transaction

ChyronHego Investor Presentation March 2014

ChyronHego Investor FAQ and Introduction to Vector Capital

Agreement and Plan of Merger: ChyronHego Corporation, Vector CH Holdings (Cayman), L.P., And CH Merger Sub, Inc.

ChyronHego SEC Filing: Entry into a Material Definitive Agreement with Vector Capital

ChyronHego One Year Stock Price Chart

Broadcast Vendor M&A: Vizrt to be Taken Private in $374 Million All-Cash Deal

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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