12.23.2008 10:25 AM
Harmonic Takes Scopus for $51 million
Video processor Harmonic (NASDAQ: HLIT) is acquiring its Israeli counterpart Scopus (NASDAQ: SCOP) in a $51 million deal. Harmonic, based in Sunnyvale, Calif., and also a maker of HD and video-on-demand technology, is picking up Scopus of Rosh HaAyan, Israel, for $5.62 in cash per outstanding share, or nearly $81.5 million. Scopus cash on hand and short-term investments render the deal value at $51 million.
The price-per-share tendered represents a 46 percent premium over Scopus share price, which closed at $3.84 the day before the deal was announced. Robin Dickson, Harmonic’s chief financial officer, said Scopus revenues motivated the premium. The company reported record revenues for the third quarter of this year of $19.9 million, a 31 percent increase over last year, and a 4 percent increase over 2Q. Net income was $500,000, or 4 cents a diluted share, compared to a 1 penny loss the previous year.
Harmonic can boost the bottom line by eliminating redundancies in marketing, a la trade shows and advertising, as well as the costs associated with being a public company, Dickson and Harmonic chief Patrick Harshman both noted. The combination is expected to yield between $8 million and $10 million in savings within the first year. It will also yield combined cash of between $230 million to $240 million, with which Harshman indicated Harmonic would be shopping around.
The international component was another carrot for Harmonic. Around three-quarters of Scopus’s business is non-U.S. based, giving HLIT instant access to international markets where it has no presence.
Prima facie, both companies play in the same space, but the Harmonic execs said there are differences. Scopus has contribution technology that immediately moves content to distribution points, as for newsgathering or live sports applications.
“Nearly 50 percent of their business is in the broadcast content distribution and contribution space; not where we actively participate,” Harshman said in a Tuesday morning conference call. “The average size of their deal is somewhat smaller. They have no 10 percent customers.”
Decoders are another big draw for Harmonic. Scopus makes a dual-carriage decoder for cable headends, the IPR_3910, which it introduced over the summer. The device addresses the requirement that U.S. cable operators carry broadcasters’ analog and digital signals through 2012.
“The IRP product line is 49 percent of Scopus’s revenue,” Harshman said. “Harmonic’s not in the space. It’s another product space we find very interesting.”
The Harmonic poach comes after Scopus broke off negotiations with Optibase, another Israeli firm. Optibase made a tender offer for Scopus in mid-2007 for $5.25 per share. The company at the time held 22.5 percent of Scopus outstanding shares.
“Optibase, with its legal advisros, is currently examining the alternatives,” the Herzliya, Israel company said in a press release Nov. 6.
The Harmonic deal received supporting votes from shareholders representing 50 percent of Scopus outstanding shares. Harmonic dipped slightly from more than $5.80 to below $5.60 per share.
The deal is expected to close late in the first quarter of next year.