Belden Sees Green In Its New Grass Valley

Belden Inc. announced on Feb. 6 that it would acquire Grass Valley from private equity firm Francisco Partners for $220 million. The deal, which is expected to close by March 31, brings together the broad line of television production, signal distribution and acquisition technology of Grass Valley with the extensive graphics, routing and production equipment lineup of Miranda Technologies, which Belden acquired in July 2012.

Once combined under the Grass Valley brand, the unit will employ more than 2,000 people with annual revenue of $500 million.

Belden is $2.1-billion publicly traded technology conglomerate that broke into TV production with the Miranda purchase. It’s led by 46-year-old CEO John Stroup.

In this interview with TVNewsCheck Contributing Editor Phil Kurz, Stroup discusses the strategy behind the deal, the integration of the companies and the market opportunities.

An edited transcript:

What’s your vision for the new Grass Valley?

Our vision for the combined company is to run Miranda and Grass Valley as a single unit. We think there are enormous complementary aspects to the company, not only from a product line point of view, but in terms of where the companies have been strong historically.

We very much want to be the company that customers look to to solve their broadcast problems. We think we clearly have the potential to be one of the strongest, if not the strongest, companies in the industry.

When people think of Grass Valley and Miranda, certain markets come to mind —  television stations, broadcast networks, cable TV, new media and live TV production. What do you see as your market opportunities?

I would say all of the markets you listed. There is no shift in strategy related to the markets we are going after. We feel like we are better positioned than we were before. Obviously, all of our historical customers continue to be extraordinarily important.

It is important for us to spend time with all stakeholders and make sure we are giving them the technology products and services they need.

What is the split between international and domestic in terms of revenue?

I would guess that it’s probably about 35% United States. That was certainly the case with Miranda. When we combine these businesses, it will be almost perfectly balanced: a third in Asia, a third in America and a third in Europe and the Middle East.

Do you see that split changing over the next three years?

I don’t think significantly. Obviously, we are going to be impacted by market dynamics. At Miranda, 2013 was very strong in Asia. I think our growth rate was about 35% in Asia, while we saw a little bit of a pullback in Europe.

How long was the deal in the works before the Feb. 6 announcement?

At Belden, we had been watching Grass Valley even prior to the [June 2012] acquisition of Miranda. When we acquired Miranda and got to spend more time with the Miranda management team, we gave a lot of attention to the kinds of investments we could be making.

We engaged the ownership of Grass Valley six to eight months prior to the announcement.

You know, a lot of people at Miranda know people at Grass Valley. [Grass Valley CEO] Tim [Thorsteinson] was on the board of Miranda, so there was a connection between Tim and the Miranda folks. That made it pretty easy to establish a dialog.

I understand that Miranda President Marco Lopez will lead the combined companies. Will Thorsteinson have any continuing role?

Yes. Tim is going to remain with us in more of an advisory role and help us with the integration. Tim has been very supportive during the entire process, and I am confident he will continue to be so through the integration.

Where do things stand when it comes to the integration of the two companies?

Obviously, the deal hasn’t closed yet. We hope to close on or about March 31, but in parallel we are communicating. We have already been meeting at the major facilities of Grass Valley. We formed a number of teams to help us with the integration. I would say that given we haven’t even closed the transaction, we are pretty far ahead.

Do you anticipate significant personnel cuts?

What is likely to happen is we will leverage common investments. We thought neither business had the kinds of economies of scale they wanted to achieve.

One example is manufacturing. Both companies’ manufacturing is running significantly under full capacity. Another is sales. In most cases, each has sales teams that are calling on most customers. So I think it is possible there would be a reduction in the number of employees in those areas.

One area where that is not going to happen is R&D.

When would we expect to see the cuts?

That’s hard to predict. The teams looking at where there are opportunities to create more efficiency are still in their planning phases. So it is difficult for me to know with any certainty when we would have a position on that.

To the degree there is overlap in the product lines of Grass Valley and Miranda, say in routing and graphics, how will they be addressed?

We are going to make sure that we take care of our customers. We recognize customers have made investments in product lines, and for us to pull the rug out from underneath them is just not a good way to do business.

We are going to make certain that if there are opportunities to rationalize product lines, we are going to give our customers a migration path that makes sense and give them the time they need to do it in a reasonable way.

The deal is expected to close March 31. That’s essentially on the eve of the NAB Show (exhibits open April 7). What kind of Miranda-Grass Valley presence should we expect at the convention?

The team is hoping to have a unified display so we can take the opportunity to share with folks what this new company is all about. To the extent that plans have been formalized and finished, we would like to communicate product strategy. We want to keep our customers as informed as we possibly can.

If we don’t run into any hiccups between now and then, we would anticipate having a unified presence at the NAB Show.

Are there other product lines or technology you need to round out the new Grass Valley?

There probably is nothing that comes to mind that would be of similar scale. I am not going to rule anything out, of course.

I would say that most of the things that are in our funnel today are within the area of Miranda and Grass Valley. These tend to be smaller in nature and tend to be more specific to a given product area.

There is a variety of other product areas where we could do it ourselves organically, or we could make an acquisition.

Through a series of acquisitions, Harris pursued a similar strategy that you now seem to be pursuing– creating a one-stop broadcast super store. It didn’t work out for Harris. What makes you think it will work out for you?

We feel like this is an industry trend that will continue. We have seen this type of consolidation in our other markets as well, both in enterprise and broadcast.

If possible, customers would prefer to have a limited number of suppliers to help them with their applications.We think broadcasters have been under a lot of pressure from a cost point of view, particularly with respect to [operating expense]. They really demand more and more from their suppliers all of the time.

If we can develop product lines that meet their needs, that are current and innovative. Maybe more importantly, if we have the right kinds of applications and commercial resources to help our customers select the right products and customize as necessary, we feel like we have the opportunity to be their first choice.

The television industry — particularly contribution, production and distribution — seems to be becoming more IP-centric by the minute. Is that your view too, and, if so, how well is the new Grass Valley positioned to take advantage of that trend?

We think that is a trend and will continue. We have seen this trend in other markets that we serve, but it tends to happen more slowly than people think.

Our view is that understanding the application and having intimacy with the customer tends to be more important than anything.

Is there anything else you would like to add about the new Grass Valley or the acquisition?

This is an acquisition, and more importantly an integration, that’s going to happen with purpose, and I think it is going to happen rapidly. The fact that the Miranda management team very quickly decided that Grass Valley was the right name for the company is probably a very strong and positive indicator of how this thing is going to go. There is enormous respect for each other and clarity about what customers want and need.

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