Ericsson Offers $1.4B for Tandberg TV
Ericsson AB (Nasdaq: ERIC) firmed up its intentions to be a major IPTV player Monday with a $1.4 billion all-cash offer for video encoding specialist Tandberg Television , about 10 percent higher than the takeover bid tabled by Arris Group Inc. (Nasdaq: ARRS) in January. (See Ericsson Bids for Tandberg TV.)
Six weeks ago Arris made an offer of 96 Norwegian Kroner (US$15.67) for each Tandberg TV share -- NOK80 in cash and NOK16 in Arris stock. That sent Tandberg TV's stock up to NOK99 ($16.16), suggesting the video equipment vendor's shareholders wanted a better offer from Arris or another bidder. (See Arris Pounces on Tandberg TV.)
Now they have it. Ericsson is offering NOK106 ($17.31) in cash for each Tandberg TV share, an offer worth NOK8.5 billion, or $1.39 billion.
The Swedish giant says it already owns 11.7 percent of Tandberg TV's stock, has the backing of shareholders who represent a further 13 percent, and will publish an offer document this week.
It also says the acquisition, if completed in the second quarter, would be accretive to its earnings in 2007, excluding one-off costs. Tandberg TV reported revenues of $350 million, and net income of $55.6 million (earnings per share of $0.70), for 2006.
Tandberg TV's board, which has recommended the Arris offer to its shareholders, says it has noted the "unsolicited, voluntary, all-cash offer" from Ericsson, and won't comment further until it has examined the details and conditions in the offer document.
The news sent Tandberg TV's stock up more than 10 percent to NOK111, most likely in expectation of an improved counter-bid from Arris or another player. Ericsson's share price is up by 0.20 Swedish Kroner, just less than 1 percent, to SEK26.10 on the Stockholm exchange.
In a research note issued this morning, analysts at Dresdner Kleinwort say they believe a counter bid from Arris or even Motorola Inc. (NYSE: MOT) is possible. However, they add that, with about 12 percent of Tandberg TV already under its ownership, Ericsson "should have the upper hand" in any bidding war.
Ericsson says acquiring Tandberg TV, a company with about 175 customers and a 25 percent market share of the global video processing market, would be a "significant step" towards a "world leadership position in IPTV... In combination with Ericsson's existing products the combined companies will be uniquely positioned in offering complete IPTV solutions." (See Tandberg Wins Deal, T-Com Croatia Uses Tandberg TV, Tandberg Wins Shanghai, and USDTV Picks Tandberg.)
Ericsson has been on a shopping spree of late, citing its IPTV strategy as the main driving force behind its acquisitions. (See IPTV Drives Ericsson to Redback and Ericsson Buys Entrisphere.)
And last week it made its first IPTV customer announcement, though this just highlighted how far it trails some of its major competitors, such as Alcatel-Lucent (NYSE: ALU) and Siemens Communications Group , in the IPTV sector. (See Ericsson, Nortel Push on IPTV.)
Now, though, Ericsson is making it clear that it intends to be among the leading pack in IPTV hardware and service delivery software. And executives in the telco TV sector expect the Swedish firm to strengthen its hand even further with a bid for video server and IPTV middleware partner Kasenna Inc.
— Ray Le Maistre, International News Editor, Light Reading