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Belden Miranda Buy Signals Optimism in Broadcast Market

ST. LOUIS, MO.: Belden’s board is bullish in broadcasting. Developments in the sector motivated the company to make its offer to acquire Canadian broadcast infrastructure provider, Miranda. The deal, valued at C$345 million, was announced this week. Pending shareholder approval, it’s expected to close July 24. The acquisition will give Belden a significantly expanded footprint in the broadcast market.

“The broadcast market has many attractive attributes,” said Belden president and CEO, John Stroup.

Breaking broadcast down into three segments—creation, aggregation and delivery—Stroup said several “macrotrends that make this an especially exciting market.”

First, he said, was an “incredible increase in the volume of content. Not only is there a proliferation of specialty channels and pay-per-view options, but the adoption rate in emerging markets is driving rapid growth in global content and consumption.

“Second, the complexity of content has grown, especially with high-definition and 3D programming. Live TV, for example, is increasing significantly and requires more cameras, video feeds, processing and monitoring than prerecorded content. All of this extra work depends on a robust infrastructure that can process and deliver those signals.

“Additionally, consumption of this content is expanding beyond the traditional TV schedule,” including mobile, on-demand and Internet TV. “These long-term trends indicate a significant growth opportunity for Belden.”

The Miranda acquisition increases Belden’s exposure in the broadcast market from $3 billion to $4.6 billion market, with an overall growth rate of 5 to 6 percent. Addition of Miranda gives Belden a market share position of 11 percent in broadcast signal transmission infrastructure products, Stroup said.

Cable is still at the core of Belden’s revenues, generating $1.39 billion in 2011, versus $289 million for connectors. Networking accounted for $307 million. However, the compound annual growth rate (CAGR) for cabling from 2005 through 2011 was 2.5 percent, while connector CAGR was 35.8 percent, and network started from zero in 2005. Stroup also said that connectivity and networking products yielded higher margin than cable.

“We estimate that half of our revenue in the broadcast market will be from networking and connectivity products, post the close of this transaction,” Stroup said.

The deal gives Belden stronger footing in international markets as well, Stroup said. The company’s current international emphasis is on Brazil, India and China. With regard to European debt crises, Stroup said about 10 percent of Belden’s revenues are derived from the region.

“We’re concerned about how that’s going to play out,” he said, forecasting that U.S. growth would be slow as a result, at least until the November election. He said that while growth in China has slowed, a rebound is expected by the end of the year.

Belden, in cables since the 1920s, expanded into connectors and data networking technology through a series of acquisitions, starting with its 2005 merger with Cable Design Technologies.

The company bought Ethernet interface provider Hirschman in 2007 for $260 million. German connector company Lumberg Group, with 2006 revenues of $75 million, was acquired that same year for an undisclosed sum. It took wireless LAN gear maker Trapeze Networks in 2008 for $133 million.

The next year, Belden bought Telecast Fiber Systems in 2009 in a deal valued at $20.1 million. Return on investment has been 15.1 person on that deal, Belden’s executives said.

Acquisitions in 2010 included GarrettCom, giving Belden a further foothold in data networking with industrial grade switches, routers, converters, serial communications and security software. Belden also bought Thomas & Betts, a connector company, that year for $78 million in cash. Tofino Security was added last year, as was IMC Corp., the latter in a deal valued at $21.6 million.

Miranda brings in its own acquisitions, which included Nvision in 2008 for $40 million, and OmniBus in 2010 for $46.7 million.

Miranda ended 2011 with record revenues of $181.9 million, up 27 percent from 2010 and representing 16.3 percent organic revenue growth (excluding acquisitions). The increase boosted five-year CAGR to 12.9 percent. Henk Derksen, chief financial officer for Belden, outlined financial performance goals for the combined companies: 6 to 8 percent organic revenue growth; 13 to 15 percent growth in operating profit; free cash flow exceeding net income, and return on investment capital of 15 to 17 percent.

The $331 million deal (C$345 million) with Miranda is expected to be accretive by 15 cents a share for Belden from August through December of this year, and 45 cents a share for fiscal 2013. Return on investment is expected to be 15 percent within three years.

Belden is financing the deal with cash on hand and $200 million from an existing facility, Derksen said. Belden ended 2011 with $382.7 million in cash and equivalents, and long-term debt of $550.9 million. Derksen said the company likely will refinance the acquisition with a Canadian term loan.

Miranda president and CEO, Strath Goodship, will remain at the helm of the company, Stroup said.

~ Deborah D. McAdams

June 5, 2012:
Belden To Buy Miranda for C$345 Million
Shares of Miranda shot up this morning after it announced that U.S. cable manufacturer Belden had agreed to buy the company for C$17 a share.

March 1, 2006:
“Cable Management Product Line Shows Workings of Newly Merged Belden/CDT,” from Cabling Installation & Maintenence