Harmonic Deals for Thomson Video Networks

Says Merger Will Build Global Scale
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In a move that further consolidates the video encoding and infrastructure market, Harmonic has inked a deal to acquire Thomson Video Networks for $75 million in cash, plus $15 million in post-closing adjustments.

Harmonic said the acquisition of the Rennes, France-based maker of video compression and delivery products is poised to create more global scale and expand its customer base.

In a presentation about the deal, Harmonic noted that TVN has more than 800 customers, including Astro, BBC, Canal+, DirecTV, Foxtel, Telefonica and Vodafone. Harmonic noted that about 95% of TVN’s revenues, estimated to be €71 million (US$77 million) for calendar year 2014 based on the vendor’s audited financial statements, comes from outside the U.S.  Harmonic posted Q3 sales of $83 million, down from $108.1 million in the year-ago quarter as the vendor dealt with the consolidation of key service provider customers.

Harmonic also estimates that there’s a less than 50% customer overlap between the companies, and that the combined company would have an R&D organization of more than 600 engineers and a global services arm with more than 300 people and a network of more than 300 channel partners.

The deal comes as other video technology suppliers combine through M&A, including Ericsson’s acquisition of Envivio, and Amazon Web Services’s purchase of Elemental Technologies.

Harmonic said the proposed deal is anticipated to be accretive to Harmonic's non-GAAP net income in the first year after closing, exclusive of the amortization of intangibles and non-recurring charges. They hope to close the deal in Q1 2016.

"This combination of Harmonic and TVN will, if completed, set the bar for video innovation globally," said Patrick Harshman, Harmonic’s president and CEO, in a statement. "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.”

Harmonic, which was advised on the deal by LD&A Jupiter, said the proposed acquisition is in the form of a “put” option that is subject to the selling shareholders exercising the put option following a consultation process with TVN’s employee works council in France.

Thomson Video Networks, a company backed by private equity partner Edmond de Rothschild, acknowledged it had received the offer, and agreed that it stands to give the company “greater global scale and resources needed to drive more value and continuous innovation to the benefit of its customers.”  

“Consequently, in reply to this offer, Harmonic has been granted exclusivity by Thomson Video Networks' shareholders while Harmonic secures adequate financing for the proposed transaction,” TVN said.

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