Posts Tagged ‘Red Bee Media’

Ericsson Sells Majority Stake in Media Solutions Business

Analysis, Broadcast technology vendor financials, Broadcast Vendor M&A | Posted by Josh Stinehour
Jan 31 2018

Ericsson announced two major developments with its media operations: (1) the sale of a majority interest of 51% in its Media Solutions Business to private equity firm One Equity Partners; (2) and its decision to maintain ownership of Ericsson’s former Broadcast and Media Services, which was renamed Red Bee Media in November 2017. 

The Media Solution Business comprises Ericsson’s compression and PayTV product portfolio built in part through the acquisitions of Tandberg Television (2007), Microsoft Mediaroom (2013), Fabrix (2014), Azuki Systems (2014), and Envivio (2015).  Full year revenue for the Media Solution Business is around 3 billion SEK or approximately $380 million USD.

Red Bee Media encompasses Ericsson’s managed services portfolio in the broadcast sector, which was built in part through the acquisitions of Technicolor’s Broadcast Services (2012), Red Bee Media (2013), and FYI Television (2016). Annual revenue for Red Bee Media is approximately 3.5 billion SEK or around $444 million USD.

These announcements came after a nearly nine month evaluation of strategic alternatives for the businesses.  The initial announcement was made shortly before the 2017 NAB Show in March of last year.

Challenging operating performance for these businesses was also initially disclosed in early 2017.  It continued.  Ericsson’s Q3 2017 financial results showed a segment operating margin of -77% for the year-to-date nine month period in the Other segment where the Media Solution and Red Bee Media businesses were reported.  Further financial information indicated Media Solution and Red Bee Media represented around 75% of the sales reported in the Other segment during the third quarter of 2017.  In the most recent announcement, Management stated substantially improvements had been made during 2017, especially in regards to margins.

During its conference call with analysts, Ericsson indicated adjusted operating income for Red Bee Media was approximately -38M USD for 2017, though “steering towards breakeven.”

While improved, the Media Solutions business operating losses remained “substantially higher” than Red Bee Media in 2017.

The majority sale to One Equity Partners is anticipated to close in the third quarter of 2018.  As outlined in the public statements, at the time of closing employees, contractors, and specified assets and liabilities will transfer to the new company.  Since Ericsson is retaining a 49% ownership position, the Company will continue to report its portion of profit and loss in its financial statements.  No financial terms of the transaction were provided.

The decision to retain Red Bee Media was reached after considering a variety of alternatives.  While Ericsson disclosed it receive bids for Red Bee Media, Management concluded these bids did not reflect the value of the business.  In fact, Management stated in its public remarks that “upside from continued development was deemed to be significant.”

Several factors associated with the transaction are worthy of emphasis.  These combined businesses represent around 3% of Ericsson’s annual revenue.  While not significant assets in the context of Ericsson, these are considerable product and service portfolios in the global media technology sector.

The press releases announcing the strategic initiatives admonish several statistics highlighting the significant footprint of these businesses, among these almost 4,000 combined employees and a tier1 list of media customers. The consideration of their customers was apparent in Ericsson’s decision making. In fact, Ericsson’s President and CEO Börje Ekholm made explicit reference to this in the press release, stating “We are confident that the direction we announce today will enable us to create the best long-term value, for both our customers and our shareholders.”

 

 

Related Content:

Ericsson Press Release on Media Solutions Divestiture

Ericsson Press Release on Red Bee Media

 

 

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More Broadcast Industry M&A: Ericsson Announces Intent to Purchase Red Bee Media

broadcast technology market research | Posted by Joe Zaller
Jul 02 2013

Ericsson announced that it is purchasing Red Bee Media from Macquarie Advanced Investment Partners, L.P.

Financial terms were not disclosed.

Headquartered in the UK, RedBee is a leading provider of broadcast playout and subtitling services.  It was created when the former BBC Broadcast Limited was acquired by Macquarie in 2005 for approximately $260m.  The company has approximately 1,500 employees, as well as media services and operations facilities in the UK, France, Germany, Spain and Australia.

Red Bee had revenue of approximately $250m in 2008-9, according to published reports.

The deal marks further consolidation of the European playout business by Ericsson.  In March 2012, Ericsson acquired the broadcast services business of Technicolor in a deal that included €19m in cash and a potential earn-out of up to €9m.

In its announcement, Ericsson said the deal will further expand its capabilities in the TV industry, and highlighted the fact that it can bring enhanced efficiency into the business operations of regional and global broadcasters.

This is could be a good move.  Our broadcast industry market research shows that increased efficiency is not only one of the key business concerns of broadcasters and media companies, it is also a key driver of purchasing decisions for many broadcast technology end-users world-wide.

According to Ericsson, the TV and Media industry is “undergoing an unprecedented transformation driven by consumers’ appetite for rich, interactive, anytime, anywhere entertainment. The confluence of communications, broadband and media technologies and the use of IP and mobile networks to generate and deliver such experiences is creating new opportunities in the ecosystem.”

The company has said that its strategy is “to grow in the broadcast services market and take advantage of its technology and services leadership to help broadcasters and content owners address the convergence of video and mobility.”

By assembling a portfolio of managed service providers and highlighting efficient monetization of TV content, Ericsson appears to be in the process of creating an integrated provider that can help broadcasters and media companies manage the complexities of television playout and asset monetization for both linear and multi-platform content.

“Ericsson is making a step change to our business, cementing our commitment to TV and broadcast services and continuing a journey we started in 2007,” says Magnus Mandersson, Executive Vice President and Head of Business Unit Global Services, Ericsson. “We can create value for broadcasters by making digital content more accessible, enabling monetization of TV content more efficiently.”

Ericsson says that after the deal closes, Red Bee will be incorporated into Ericsson’s Global Services business unit, and the UK will become a global media hub for Ericsson. The company will have more than 4,000 employees based in the UK, with more than one-third working in the media services business.

The closing of the acquisition is subject to approval from relevant regulatory authorities and other contractual conditions.

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Related Content:

Press Release: Ericsson to acquire leading media services company Red Bee Media

More Broadcast Industry M&A: Technicolor Sells Playout & Services Business to Ericsson

Devoncroft Partners broadcast industry market research — The 2013 Big Broadcast Survey (BBS)

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© Devoncroft Partners 2009 – 2013. All Rights Reserved.

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