News Corp. Moves to Take NDS Private

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News Corp. made moves last Friday to take its British-based set-top box manufacturing unit – NDS Group – private in a deal valued at about $3.6 billion.

According to the deal, all of the Series A ordinary NDS shares that are traded on the Nasdaq Exchange would be cancelled for $60 per share in cash; and about 68% of the Series B NDS shares held by News Corp. would be cancelled in exchange for $60 per share in a mix of $1.5 billion in cash and a $200 million vendor note. As a result, News Corp. will reduce its equity stake in NDS from 72% to 49% after the transaction is completed.

NDS makes technology used in set-top boxes for News Corp-controlled satellite TV services British Sky Broadcasting and Sky Italia, among others. In a statement, News Corp. said the deal “provides an excellent opportunity for public shareholders to exit an illiquid investment at an attractive price in a very challenged financing and economic market environment.”

The $60 per share offer represents a 20% premium over NDS’ closing price of $49.70 each on June 27.

News of the deal sent NDS shares soaring more than 19% ($9.64 each) to $59.34 in early trading Monday.

The deal is subject to regulatory and shareholder approvals. News Corp. has said it expects the deal to close some time in the fourth quarter.

NDS has been performing well – revenue rose 20% and operating income was up 21% in the third quarter – but the structure of the company has made it difficult for News Corp. to extract excess cash from the business without taking a substantial tax hit. With this deal, News Corp. stands to reap about $1.7 billion in cash and debt.

Permira Advisers L.P., a U.K.-based private equity fund will end up with a 51% equity stake in NDS and will provide the equity financing for the transaction. Debt financing for the deal will be provided by JP Morgan and Morgan Stanley.

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