Arris Pounces on Tandberg TV
Arris is offering 96 Norwegian Kroner ($14.91) for each Tandberg TV share -– NOK80 in cash and NOK16 in Arris stock -– in a deal valued at about $1.2 billion. Arris, which needs the backing of 90 percent of Tandberg TV's shareholders, expects the deal to close in the second quarter of 2007.
The news sent Tandberg TV's stock up by NOK13, more than 15 percent, to NOK99 today on the Oslo stock exchange. That's higher than Arris's offer, suggesting that Tandberg TV's investors expect a better offer, either from Arris or a rival bidder.
Arris, best known as a supplier of VOIP, data, and cable modem products to cable operators, is buying its way into the video processing and IPTV supply chain with this deal. Should the takeover be successful, Arris would be able to offer service providers a package of voice, video, and data capabilities. (See TV Cabo Picks Arris, Arris Deploys Wideband, and Time Warner Picks Arris.)
Such a move has been expected since Arris raised $225 million from the debt market to help fund acquisitions. That move was largely prompted by the video-centric acquisitions made by two of Arris's keenest rivals, Cisco Systems Inc. (Nasdaq: CSCO) and Motorola Inc. (NYSE: MOT). (See Ups & Downs at Arris.)
Both those vendors have strengthened their video hands with a series of acquisitions in recent months, with Motorola recently swooping in on one of Tandberg TV's rivals, Tut Systems Inc. (Nasdaq: TUTS). (See Cisco Steps Up Telco TV VOD, Moto Taps Tut for $39M, Motorola Gobbles Up Netopia, Motorola Buys Switched Digital Player , Cisco Snatches VOD Vendor Arroyo, and Moto Buys VOD Vendor Broadbus.)
And word on the street suggests the consolidation process is not yet over. (See Sources: Moto's Shopping for IPTV Middleware.)
Arris says Tandberg TV, which supplies its technology to more than 175 broadcasters, telecom carriers, and cable operators, commands a 25 percent share of the global video processing market. (See Tandberg TV Targets Cable, Tandberg TV Displays Head End, T-Com Croatia Uses Tandberg TV, Tandberg Wins Deal, and Shanghai Cable Taps Tandberg.)
Some of that market share will come from Tandberg's own acquisition of encoding specialist Skystream early last year. (See Tandberg Compresses SkyStream.)
Other suppliers of headend encoding equipment for IPTV deployments include Cisco/Scientific Atlanta, Harmonic Inc. (Nasdaq: HLIT), Motorola, and Thomson S.A. (NYSE: TMS; Euronext Paris: 18453).
Arris's bid comes as Tandberg TV looks back on what was mostly a bumpy 2006. In October it cheered investors by saying its IPTV business was getting back on course, with signs of renewed growth and a healthy backlog of orders. (See Tandberg TV Bounces Back, Tandberg TV Stock Off 38% After Warning, and IPTV Sluggishness Slugs Tandberg TV.)
Tandberg TV, which is due to announce its fourth-quarter and full-year financials on February 8, is on course to report 2006 revenues of $350 million to $354 million.
By contrast, Arris reported revenues for the first nine months of 2006 of $657 million, up 31 percent compared with a year earlier.
— Ray Le Maistre, International News Editor, Light Reading