Technicolor to buy Cisco's set top box business for $602 mn

French media and entertainment technology group Technicolor yesterday struck a deal to buy Cisco's home equipment business (set top box business) for €550 million ($602 million) in cash and stock.

Under the terms of the deal, Cisco will receive about €413 million in cash and about €137 million in newly issued Technicolor shares, subject to certain adjustments provided for in the agreement.

The proposed acquisition would result in Technicolor's Connected Home segment reaching adjusted EBITDA in excess of €200 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, the Paris-based company said in a statement.

Technicolor and Cisco will also 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.

As part of the strategic agreement and post closing of the transaction, Hilton Romanski, senior vice president and chief strategy officer of Cisco, will join Technicolor's board of directors.

Cisco entered the set top box business in 2005 and since generated revenues of $27 billion. Cisco said that the Connected Devices business will end fiscal 2015 with revenue of approximately $1.8 billion.

Cisco has been selling set-top boxes and home gateways (cable modems) to internet and pay TV providers worldwide. Post closing, Technicolor will have a global market share of 15 per cent in the set-top boxes and home gateways segment.

It will have 60 million devices shipped each year and a global presence with an installed base of 290 million set-top-boxes and 185 million gateways in over 100 countries.