Harmonic To Acquire Omneon For $274 Million

Video-encoding vendor Harmonic announced a definitive agreement to acquire privately held Omneon, a provider of video-production and playout gear, in a deal worth about $274 million in cash and Harmonic stock.

Omneon's customers include the BBC, BSkyB, CBS, Comcast, Discovery Communications, EchoStar, NBC Universal, News Corp., Televisa, Turner Broadcasting System and Viacom.

"This proposed combination will position Harmonic to become a global leader in video infrastructure for the digital media industry," Harmonic president and CEO Patrick Harshman said in a statement.

Omneon has approximately 280 employees worldwide, and is based in Sunnyvale, Calif., with research and development facilities in Sunnyvale and Beaverton, Ore. Harmonic, also based in Sunnyvale, had 842 employees as of the end of 2009 and plans to move to a new headquarters in San Jose in August.

Harmonic said there may be some redundancies between the two companies that will result in layoffs but that any staff reductions would be very minimal.

Omneon CEO Suresh Vasudevan said that the two companies' technologies are complementary and that "we see unique opportunities to leverage our technology adjacencies and drive market-leading innovation."

The combined company would have more than 2,000 customers in more than 100 countries. It would have a combined global R&D organization of 450 engineers, a global sales and service organization of 330 people and a network of more than 250 global sales channel partners, according to the companies.

Omneon had 2009 annual revenue of $105 million, of which 67% was outside the U.S., and no single customer represented more than 10% of total revenue. Omneon's gross margin was 58% in 2009.

The proposed acquisition is subject to customary closing conditions and regulatory approvals, and is expected to close in the third quarter of 2010. The transaction has been approved by the boards of directors of both companies but still requires shareholder approval. Harmonic said it has entered into voting agreements with holders of a majority of Omneon's outstanding shares of capital stock, pursuant to which such Omneon stockholders agree to vote in favor of the transaction.

Under the terms of the deal, Harmonic will pay $190 million in cash and issue approximately 17.1 million shares of its common stock representing. The $274 million figure is based on the May 5 closing price of Harmonic common stock and is net of Omneon's cash balances, which are expected to be approximately $32 million at closing.

Harmonic said the transaction is expected to be neutral to Harmonic's 2010 net income and accretive to net income in 2011, excluding certain items.

Omneon's investors include Accel Partners, Norwest Venture Partners, Advanced Technology Ventures, Invesco Private Capital, Meritech Capital, Intel Capital, Lucent Venture Partners, Centre Palisades Ventures, The Ignite Group and J.P. Morgan Chase & Co.

BofA Merrill Lynch acted as exclusive financial advisor to Harmonic on the deal.