MUMBAI: Cisco has sold its set-top-box (STB) business to Technicolor for $600 million in a cash and stock transaction.
The board of directors of the two companies will review the deal, which will be on a cash free, debt free basis.
Under the terms of the agreement, upon the closing of the transaction, Cisco will receive approximately $450 million in cash and approximately $150 million in newly issued Technicolor shares, subject to certain adjustments provided for in the agreement.
The acquisition should result in Technicolor’s connected home segment reaching adjusted EBITDA in excess of $219 million by year end 2016 and best-in-class profitability by 2017. The transaction will also translate into double-digit EPS accretion at Group level starting in the first full year after closing.
Simultaneously to the acquisition, Technicolor and Cisco will enter into a strategic partnership that will allow both companies to develop and deliver next generation video and broadband technologies, with cooperation on Internet of Things (IoT) solutions and services. The strategic agreement will provide ongoing commitment to all existing customers and expand offerings.
By combining their strengths and leading video expertise, from content creation to in-home delivery, the two companies will accelerate innovation and forge a leading entity that network service providers can rely on for their next generation connected home experiences.
Technicolor and Cisco also have signed a long-term patent cross-licensing agreement that covers specific intellectual property and patents from both companies. As part of the deal and after the transaction has closed of Cisco senior vice president and chief strategy officer Hilton Romanski, will join Technicolor’s Board of Directors.
Technicolor CEO Frederic Rose said, “We know that video expertise is essential to the future of creating outstanding network and home infrastructure products and services. Through this acquisition and strategic agreement, Technicolor can immediately bring its unrivalled experience and innovation in video creation, delivery, and display to more customers in more geographies, while strengthening our position as a technology leader.”
“The strategic relevance of video to every consumer, business, city and country around the world is only growing, and the market is moving rapidly. This is the right time and we have the right company in Technicolor to drive the future of the CPE business to deliver what our customers and partners need, today and into the future. At Cisco, we are prioritizing our investments to deliver on our strategy of video in the cloud, and will partner with Technicolor to position the CPE business and employees for future success,” added Cisco CEO and chairman John Chambers.
The $452 million cash portion of the consideration will be financed through cash-on-hand and fully-underwritten new debt with an anticipated limited impact on Technicolor’s leverage position.
