The deal won't cost Arris that much, though, as BigBand has an estimated $119 million in cash. As a result, Arris will effectively be spending $53 million on BigBand.
The deal represents a 76 percent premium on BigBand's share price of $1.27 at the end of trading Monday. Not surprisingly, BigBand's stock is up 75 percent to $2.22 in pre-market trading Tuesday morning. Arris's share price ended Monday at $11.52.
Arris believes it can cut significant costs from Bigband's current operating expenses and expects the BigBand business to be adding to its earnings by mid-2012. BigBand reported a net loss of $8.2 million and revenues of $19.8 million for the second quarter of this year. (See BigBand Reports Q2.)
The deal gives Arris the market leader in the SDV sector, but it also gets BigBand's dense edge QAM technologies, targeted advertising gear and systems designed to help cable operators migrate to an IP video architecture.
"We are both enthusiastic and optimistic about the BigBand acquisition because it builds on our stated business strategy of growing our current businesses into a more complete portfolio including a strong video product suite and investing in the evolution towards network convergence onto an all IP platform," said Arris Chairman and CEO Bob Stanzione in the press release announcing the deal.
BigBand and Arris have been working on equipment designed to support Converged Cable Access Platform (CCAP) (formerly known as Converged Multiservice Access Platform (CMAP)), an emerging, super-dense access architecture that Comcast Corp. (Nasdaq: CMCSA, CMCSK) and other major MSOs will tap to aid their migration to an all-IP infrastructure. (See BigBand Plots Plans for Comcast's CMAP.)
Speculation that BigBand was up for sale has been circulating for at least three years. (See AT&T Deal Boosts BigBand, BigBand IPO: Boing! and BigBand OKs 'Change of Control' Exec Packages .)
The companies will conduct a conference call Tuesday morning to offer more details about the deal.
Why this matters
The sale offers an exit for BigBand, which went public in 2007 but has struggled to grow its business in recent quarters. However, a recent win at AT&T Inc. (NYSE: T) showed some promise for its ad-insertion technology. Arris and BigBand have some overlapping products, such as edge QAMs, but the addition of BigBand will let Arris play a larger role with SDV, give it a switching fabric that MSOs can use for IP video and enhance its video ad-insertion capabilities.
The acquisition is yet another bargain for Arris, which paid $20 million for Paul Allen's set-top and software firm Digeo Inc. (See Arris Starts to Make Hay on Digeo Deal .)
Read more about BigBand.
- Product SVP Departs BigBand
- BigBand, Clearleap Team on Cable IPTV
- BigBand Hits a Sour Note
- BigBand Lays Cable IPTV Groundwork