Cisco Systems buys NDS Group in $5 billion deal

CISCO SYSTEMS, the largest maker of equipment for computer networks, has agreed to buy NDS Group in a deal valued at about $5 billion to add software used in next-generation video services.

The purchase price includes debt and retention-based incentives, Cisco said yesterday.

The boards of both companies have approved the transaction, which is subject to regulatory review and will be completed in the second half of 2012, it said.

Cisco chief executive John Chambers is working to add more profitable products as part of a turnaround plan. The company had about $46.7 billion in cash and cash equivalents in the US and overseas as of January and has pledged to be aggressive in technology acquisitions.

NDS, which makes software for pay TV channels used by BSkyB and DirecTV, is co-owned by Rupert Murdoch’s News Corp and London private equity firm Permira Advisers.

“Our strategy has always been driven by customer need and on capturing market transitions,” Mr Chambers said in the statement. “Our acquisition of NDS fits squarely into this strategy, enabling content and service providers to deliver new video solutions that leverage the cloud and drive new monetisation opportunities and service differentiation.”

NDS is Cisco’s biggest deal since it bought Scientific-Atlanta in 2006, according to data compiled by Bloomberg.

Cisco fell 0.4 per cent to $20.11 at 9.36am New York time. Before today, the stock had gained 12 per cent this year.

News Corp and Permira agreed to take NDS private in 2008 in a deal that gave News Corp a 49 per cent stake and Permira the remaining 51 per cent. News Corp had previously held 72 per cent.

As part of the deal, Cisco will get operations in India, China, Israel, Britain and France, as well as about 5,000 NDS employees, who will join Cisco’s video technology business for service providers.

The purchase price, compared to the earnings NDS makes before interest, taxes, depreciation and amortisation, is in line with what News Corp and Permira paid when they took the company private, Cisco said yesterday.

NDS had about $1.04 billion in debt in September 2011, according to a filing. – (Bloomberg)