Cisco to Acquire Norway’s Tandberg for $2.96 Billion
By Rochelle Garner
Oct. 1 (Bloomberg) -- Cisco Systems Inc., the world’s largest maker of networking equipment, agreed to buy Tandberg ASA for 17.2 billion kroner ($2.96 billion), to expand its lineup of video-conferencing products.
Cisco will pay 153.50 kroner a share in cash, Lysaker, Norway-based Tandberg said today in a statement. That’s 11 percent more than Tandberg’s closing price in Oslo trading yesterday. Tandberg is the world’s largest maker of videoconferencing equipment.
The purchase, Cisco’s first acquisition of a public company outside the U.S., accelerates its push in the video- conferencing market, where the company already offers different versions of its TelePresence system. TelePresence -- which typically includes furniture, cameras, and giant screens -- can transmit life-size images of up to six people. Some systems may cost $299,000 or more, depending on the configuration.
“This fits very well with Cisco,” said Michiel Plakman, who helps oversee the equivalent of $150 billion at Rotterdam- based Robeco NV, including Cisco and Tandberg shares. “They will immediately become the most important player in the market and aren’t paying a ridiculous premium, so this is positive.”
With Tandberg, Cisco gains less-expensive systems that appeal to smaller companies, Chief Executive Officer John Chambers said today in an interview. Tandberg, whose products range from room-sized systems to personal products, counts Ericsson AB and Bayer AG as customers. It’s developing systems for integrating video with other communications such as messaging.
Collaboration Market
“Our market is the entire collaboration market, and video is at the heart of that,” Chambers, 60, said from Norway. “Our products have almost zero overlap from a revenue perspective.” The collaboration market is a $34 billion industry, he said. Cisco has a “very small” part of the market, he said on a conference call today.
Videoconferencing sales at both companies advanced last year as customers, working to trim travel costs during the recession, added more gear. Cisco in August said TelePresence sales rose 97 percent from the previous year, without giving revenue details.
Video, which Chambers previously has called “the killer app,” needs more bandwidth than voice and data, pushing service providers and consumers to buy more gear to accommodate the bigger loads. Putting more video on networks also benefits Cisco’s main business of selling routers and switches that direct traffic. Slowing demand in that business has resulted in three straight quarters of sales drops.
Earnings Accretive
The acquisition, which is subject to review by regulators, is expected to close in the first half of next year, Cisco said. The company expects the purchase to add to earnings, excluding some items, in fiscal 2011. Oslo-based Tandberg, which has 1,500 employees, had $808.8 million in sales last year.
Tandberg was founded in 1933 as a radio factory and also produced televisions and tape-storage drives before deciding in the 1990s to focus on videoconferencing.
“Cisco probably has great synergies from acquiring a company like Tandberg, but it doesn’t seem like that’s going to benefit Tandberg shareholders,” said Arild Nysaether, an analyst at Fondsfinans ASA in Oslo with a “buy” rating on Tandberg. “The offer is a low premium, not higher than my current target price for Tandberg as a standalone company.”
The offer is supported by Tandberg’s management and board, the Norwegian company said in its statement. JPMorgan Chase & Co. is Tandberg’s financial adviser on the offer, while Lazard Ltd. is advising Cisco.
Cisco’s Purchases
Cisco, based in San Jose, California, slipped 1.3 percent in German trading to the equivalent of $23.23 as of 1:19 p.m. in Frankfurt. The shares have risen 44 percent this year. Tandberg advanced 16 kroner, or 12 percent, to 154.3 kroner. The stock has advanced 105 percent in 2009.
Cisco has bought about 130 businesses in its 25-year history, using them to enter new markets, such as cable set-top boxes and home wireless routers. Cisco bought 11 firms in 2007 and five in 2008.
“It’s clear to us that Cisco has an excellent way of driving expertise,” Fredrik Halvorsen, Tandberg’s CEO, said in an interview. “That was a reason for us in deciding to do this.”
While the distances between Norway and Cisco’s California offices will pose a challenge, Chambers said he was willing to take on the task because the companies have similar management philosophies.
“This is a Silicon Valley company in Norway. Our cultures are almost identical,” Chambers said. Cisco will be “aggressive” and “active” in making more acquisitions, he said.
With reporting by Diana ben-Aaron in Helsinki, Marcel van de Hoef in Amsterdam and Janina Pfalzer in Stockholm. --Editors: Jonathan Thaw, Celeste Perri
To contact the reporter on this story: Rochelle Garner in San Francisco at rgarner4@bloomberg.net
Last Updated: October 1, 2009 07:23 EDT |
