The board of Harmonic has been busy lately, approving a “Dutch Auction” tender offer to repurchase about 14 percent of its stock and appointing a new board chairman.
Monday’s announcement of a $100 million “Dutch Auction” offer comes into play as the video hardware and software specialist evaluates its capital structure.
Harmonic also announced that the board has appointed Patrick Gallagher to chairman of the board, succeeding Lewis Solomon, who will retire from the board prior to the company’s 2013 annual stockholders meeting. Solomon has served on the Harmonic board for about ten years, including the last five as chairman.
Separately, Harmonic said Voce Catalyst Partners intends to nominate three directors to the company’s board at that same meeting. Harmonic said it will evaluate Voce’s nominees and make a recommendation “in due course.” Voce and its affiliates own about 106,000 Harmonic share -- less than 0.1% of the company’s shares outstanding.
The board’s proposed modified Dutch Auction tender offer involves the purchase of up to $100 million of Harmonic common stock at $5.75 to $6.25 per share. Harmonic shares closed at $5.51 on Friday (April 19). The offer, representing 14.1% of Harmonic’s currently outstanding common stock, is slated to commence on April 26 and expire on May 24.
"The tender offer is the result of the Board's continued evaluation of our capital structure, the appropriate level of cash to run and grow the business, and our free cash flow and balance sheet," said Harmonic president and CEO Patrick Harshman, in a statement. "With these resources, we have multiple opportunities to drive shareholder value, including investments in strategic growth initiatives and stock repurchases. As the Board continues to evaluate our capital structure and explore ways to effectively use our cash balances to drive shareholder value - and having solicited the input of several major shareholders - the Board concluded that a cash tender offer at this time would be an appropriate mechanism to return capital to shareholders that seek liquidity under current market conditions."
The moves come soon after Harmonic identified two primary strategic growth areas: HEVC encoding for mobile video services and Ultra HD, and the Converged Cable Access Platform (CCAP). Harmonic's new focus on CCAP will pit it against Arris, Cisco Systems, Casa Systems and CommScope, and put the vendor in position as operators prepare to deploy CCAP, a dense, next-gen access architecture that aims to manage all of cable’s services and to put cable on a path toward an all-IP platform.
To help facilitate Harmonic’s ability to focus on those areas, Harmonic recently sold its lower-margin cable access business, which includes optical transmitters, amplifiers, receivers and nodes, to Aurora Networks for $46 million.
Harmonic is scheduled to report first quarter results Tuesday afternoon.