Harmonic To Buy Scopus For $51 Million

Harmonic said Tuesday it will acquire Israeli video-encoder vendor Scopus Video Networks for about $51 million in cash, in a bid to diversify its markets and expand its geographic reach.

According to Harmonic, the deal for Scopus will help it grow its worldwide customer base, particularly in international video broadcast, contribution and distribution markets.

Harmonic also expects to save money -- $8 million to $10 million per year -- by finding areas of cost-saving in merging with Scopus, including eliminating redundant job functions.

“Like Harmonic, Scopus has strong gross margins and a proven track record of innovation and growth,” Harmonic president and CEO Patrick Harshman (pictured) said, in a statement. “By combining our two companies, we see significant opportunities for product, sales and cost synergies.”

In a call with reporters, Harmonic vice president of business development and marketing communications David Price said it was too early to say how many staff reductions would result from the acquisition.

"The next step for us is to go into the integration planning," he said. "We are going to be examining products and ways to see how those products will be integrated."

As of December 31, 2007, Scopus had 291 full-time employees: 107 in research and development, 82 in sales, marketing, service and support and 74 in production and 28 in general and administrative functions. The company is based in Tel Aviv, Israel, and is traded on Nasdaq.

Harshman said the deal "extends Harmonic’s diversification strategy, providing us with an expanded international sales force and customer base, particularly in video broadcast, contribution and distribution markets, as well as complementary video processing technology and expanded research and development capability." 

Under the terms of the definitive agreement, which has been approved by both companies’ boards, Harmonic will pay $5.62 in cash for each outstanding share of Scopus, worth approximately $51 million net of Scopus’ cash and short-term investments. 

Optibase, an Israeli video-encoding vendor that holds 36% of Scopus outstanding shares, said it expects to receive cash consideration totaling $28.7 million and to record capital gains estimated between $4.1 million and $4.8 million, depending on the date of closing of the acquisition. 

The companies expect the deal to close in March 2009, subject to customary conditions, regulatory approvals and the approval of Scopus shareholders. 

Harmonic said the deal would be accretive to its 2009 earnings, excluding amortization of intangibles and non-recurring charges such as restructuring and transaction costs.

Scopus and Harmonic already had some close ties. Scopus CEO Yaron Simler previously worked at Harmonic for 13 years, most recently as president of Harmonic’s Convergent Systems division. In addition, Sunnyvale, Calif.-based Harmonic has had an agreement to resell Scopus' integrated receiver/decoder (IRD) devices for the past few years, Price noted.

Harmonic said it has received voting agreements supporting the proposed acquisition from shareholders representing about half of Scopus’ outstanding shares.

For the first nine months of 2008, Scopus had revenue of $55.4 million, a 35% increase from the same period last year, and a net profit of $0.6 million versus a $2.5 million loss in 2007. Approximately 79% of Scopus’ sales were outside the U.S., with no single customer representing more than 10% of total revenue.