Casa's cable auction might draw more bidders

Thanks to its $20 million stalking horse bid, Vecima Networks is currently in the catbird's seat to acquire the cable assets of Casa Systems, as the wireline and wireless tech specialist goes through a court-supervised Chapter 11 process.

But Vecima may soon have company.

"We're looking at it again," Paul Broadhurst, president, founder and group CEO of Technetix, said. He said Technetix made prior, separate offers for Casa when the supplier explored a sale of its cable business over the past couple of years (more on that later).

"I think it can be turned around … The market needs competitors," Broadhurst said.

UK-based Technetix is no stranger to M&A. Among recent moves, it acquired Lindsay Broadband in 2022, a deal that shored up Technetix's presence in the Americas and expanded it into wireless products, including Wi-Fi gateways and mini-cells.

However, a play for Casa would take Technetix, a company focused largely on network construction planning and outside plant equipment (including amplifiers, nodes and power gear), into the world of the cable modem termination system (CMTS), including new virtual forms of the CMTS.  

An acquisition of Casa's cable business would be "transformative" for Technetix, Broadhurst said. "We feel there's a great opportunity, and maybe there still is."

Related:Casa Systems to sell off its cable and 5G core/RAN businesses

Legacy and vCMTS

In addition to expanding product portfolios, the winning bidder would also come away with a presence (or a bigger presence) at some of Casa's legacy CMTS customers, including Vodafone, Liberty Global and Japan's J:COM. In 2022, Casa announced a deal to supply vCMTS and distributed access architecture (DAA) nodes to Rogers Communications, but it's not clear how Casa's products fit into the Canadian operator's long-term plans. Harmonic announced a similar deal with Rogers in 2021. More recently, Casa inked a deal to supply its vCMTS to Claro Colombia.

Charter Communications (via its 2016 acquisition of Time Warner Cable) also has Casa CMTSs in the field, but Casa evidently has no role in Charter's hybrid fiber/coax (HFC) network upgrade project. Last year, Casa disclosed that it would not be receiving orders for the initial phases of a cable network upgrade project at one of its major customers, presumed to be Charter.

There might be business to squeeze from Casa's legacy CMTS base, especially if some of the vendor's existing customers are keen to explore next-generation DOCSIS 3.1 technologies that can be enabled by software updates to existing CMTS chassis serving enhanced D3.1 or new DOCSIS 4.0 modems. But most industry insiders see more potential in Casa's vCMTS capabilities.

Related:Casa fights 'FUD' to score vCCAP deal

"The big iron – it's dead," one cable tech exec said. "No one is going to produce those products anymore."

And Casa's vCMTS platform might be had before many other cable operators – at least outside of tier 1 providers such as Comcast, Charter and Rogers – pick their vCMTS partners.

For example, Cox Communications, an operator already far along with a DAA/remote PHY deployment, has issued a vCMTS request for proposal (RFP), an industry source said.

Harmonic will no doubt go after that Cox business, as will Vecima and CommScope, which has also dealt itself back into the vCMTS game. Comcast has for years explored syndicating a vCMTS that's partly based on Harmonic's technology, but it's still not clear if or when Comcast will actually follow through with a product it can bring to the market. Cisco Systems developed a vCMTS but put that project on pause as the company backed away from the cable access business (a small design team in Boxborough, Massachusetts, still manages the cBR-8, Cisco's flagship CMTS chassis).

Time will tell if Technetix – and possibly others that are looking to expand their cable tech profile as operators pursue network upgrades – will make a formal play for Casa's cable business.  

Related:Casa cuts staff, remains 'totally committed to cable'

But it's also clear that Casa's lenders want to get the most they can. "Everyone wants this to be a competitive process," a source familiar with the situation said. "I would think others would be motivated to take a hard look at it."

Casa's cable biz was on the block before

In addition to Technetix, a handful of companies have taken a close look at Casa's cable business in recent months and years. In fact, Casa explored a cable sale two times prior to the Chapter 11 process that began to unfold last week.

Amid ongoing pressure on its overall business, Casa started to explore a range of strategic alternatives for the business in the fall of 2022, Casa CFO and one-time interim CEO Ed Durkin explained in a Chapter 11 first-day pleadings document filed on April 3. That exploration, he noted, included a restructuring transaction or a sale process for its cable and fixed wireless access (Netcomm) businesses as the company made plans to shift its core focus on Casa's cloud/RAN units.

Casa kicked off discussions with potential buyers for its cable business in the fall of 2022 and by November of that year received a "non-binding" indication of interest (IOI) from one interested party. "At that time, however, the Company chose to not pursue further discussion with the potential buyer," Durkin explained.

Casa made a second attempt to sell its cable assets starting in June 2023. In that round, Casa reached out to ten potential parties, with four of them "executing nondisclosure agreements" and three putting forth non-binding IOIs, Durkin noted.

But that pursuit was stymied by Casa's declining cable business. Most dropped out of the process, and the remaining party put forth an offer that Casa "ultimately determined, in their business judgment, was not an actionable proposal," Durkin explained.

The filings did not disclose the price that was offered at the time or whether it was above or below Vecima's current stalking horse bid of $20 million.

But coming away with Casa's cable business for anywhere near $20 million might be considered a bargain. In a 12-month period since the last time Casa reported quarterly financials (for Q3 2023), the company generated combined cable-related revenues of $104 million – $68.02 million in cable product revenues and $36.52 million in cable service revenues. However, the company's annual cable sales projections dropped to about $80 million by late August 2023.

Casa's original attempts to sell its cable assets got underway before current Casa CEO (and former Cisco Systems and PacketFabric exec) Michael Glickman joined the company on August 1, 2023.

Casa's cable auction on a fast track

Pending court approval, the fate of Casa's cable business will be determined on a relatively fast timeline.

According to another Chapter 11-related document, a cable bidding procedures hearing is set for April 24, and a cable bid deadline has been set for May 13 at 4 p.m. ET.

A cable auction (if necessary) will take place on May 15. A cable sale hearing will follow on May 31, and a closing of Casa's cable business sale will take place on or prior to June 6.