Belden Sharpens Its Television Focus

If the shareholders of Miranda Technologies Inc. accept Belden Inc.’s offer of C$17 a share for their company — and so far it appears they will — the TV technology vendor will have a new owner by the end of July. But the change in ownership is not expected to affect the management or operation of the company — at least initially.

St. Louis-based Belden, which announced its bid of C$17 per share — or C$345 million — to buy Montreal-base Miranda in a straight cash-for-stock transaction on Tuesday, says it is keeping current management led by CEO Strath Goodship and is not looking for “cost synergies” that usually mean layoffs, cutbacks or the elimination of some products or services.

“Miranda is a wonderful business that has been capably run by Strath for 10 years…. His experience and strong customer relationships are valuable assets,” Belden CEO John Stroup told securities analyst on a conference call hours after the announcement.

The only savings will come from Miranda getting out from under all the regulatory requirements that come with being a public company, he said.

When change come, Stroup said, it will be in the form of increased investment in Miranda and its product line, which now includes IT-based automation and playout systems, routing switchers, facility monitoring and multiviewers.

“The broadcast market has many attractive attributes,” he said.

For Belden, whose $2 billion in annual revenue comes mostly from networking and connectivity technology, Miranda represents deeper penetration into two areas of television where is doesn’t currently have much of a presence — “creation” (production) and “aggregation” (what TV networks and stations do).

The acquisition of Miranda “uniquely positions us as the only provider of complete end-to-end signal transmission solutions with attractive share-capture opportunities,” Stroup said.

For the analysts, Stroup identified three “macro trends” in TV that led him to Miranda’s door and that he hopes to exploit.

First is the “incredible increase in the volume of content,” he said. “Specialty channels” and pay-per-view options are proliferating and emerging markets are getting in the game to a greater extent, he said.

Second is the complexity of the content. In addition to HD and 3D, he said, live TV is “increasing significantly and requires more cameras, video feeds, processing and monitoring than pre-recorded content.”

And third is the demand for TV on second and third screens. “We demand our content whenever we want it wherever we are. We want it streamed to our mobile devices and Internet TVs,” he said. “This increased access enables increased consumption which creates content management challenges.”

In an interview with TVNewsCheck, Kevin Joyce, Miranda chief sales and marketing officer, said he has been busy reassuring employees that the acquisition is all good. They need only look at how Belden has handled earlier acquisitions: “They get their cake and eat it, too.”

In this deal, Joyce said, Belden is getting “an autonomous, focused Miranda that is going to be used as a platform to build up the broadcast vertical and Miranda is getting the scale and financial stability of a Belden that can continue to support it for a long period of time.”

With $180 million in annual revenue, Joyce said Miranda is “a nice-sized company for the broadcast industry,” but at that level it is difficult to make the investment in R&D and in further acquisitions necessary to lead in the software solutions that Miranda is committed to. With Belden, Miranda will be able to make that investment.

The deal is not only good for Belden and Miranda, but also good for the broadcasting industry, Joyce claimed. “Anytime you get two healthy companies together who know a lot about an industry and have a desire to invest even more in an industry, it’s going to help the industry. We’re going to be an even stronger partner for broadcasters.”

Since Miranda went public in 2005, it has made three major strategic acquisitions — Vertigo (live graphics) for C$11 million in 2006, NVision (routing switchers in 2008) for C$40 million in 2008 and Omnibus Systems (IT-based media management and playout) for C$42 million in 2010.

With Belden’s backing, Joyce said, Miranda expects to continue to buy. The company has “an active acquisitions list” that includes all or part of the Harris broadcast division that its parent company put on the block last month. (Editor’s Note: After this article was posted, Miranda contacted TVNewsCheck to clarify that “it does not discuss potential acquisition targets and that during the interview with Mr. Joyce, many topics were discussed, including the interesting technologies of different companies. He did not intend to imply any specific interest.”)

“Everything is on the table — Harris, Grass Valley and a host of others that have different solutions that might mesh well with our playout and product solutions,” Joyce said. “As long as we continue to perform, they are going to give us the autonomy to build a great business in broadcasting and we are going to keep doing that.”

Belden’s current position on the creation side of TV is mostly through Telecast, a maker of fiber optic links that it bought in 2009. Joyce said that it may make sense to merge Telecast into Miranda. “We will sit down with the Telecast organization and figure out what really is the best way for us to serve the customers: Is it as two independent entities, or is it integrating it into one broadcast solution?”

The sale comes as no surprise.

Last December, large investors in Miranda began agitating for such a move, believing the stock was grossly undervalued. Under that pressure, the Miranda board in March — just a month before the NAB convention — voted to review opportunities “to further enhance value” — that is, as most interpreted it, to find a buyer.

In the sale announcement, Miranda said that it “had discussions with a number of parties” before deciding to recommend to shareholders that they accept Belden’s offer. It did not identify the other parties.

Joyce conceded that the trouble on the board and the pre-NAB announcement of a possible sale may have hurt business by raising questions about the company’s future — some of them fueled by competitors. Miranda did its best to explain to customers what was happening, he said. “It definitely was not easy for our customer-facing organization to actually have that discussion.”

Joe Zaller, of Devoncroft, a researcher and consultant who follows the broadcast technology market, said the deal makes sense for all concerned and that there should not be any overhang from what led to the sale.

“I don’t see any reason for concern from a broadcaster perspective,” he said. “If anything, it is elimination of concern because Miranda has found a home with a well established company that is making a major commitment to the broadcast industry.

“If I am a broadcaster and a Miranda customer, I can feel as confident today, if not more confident, than I did yesterday because the uncertainty has been removed.

“The management team is going to stay in place, the product development is going to stay in place and they have got more resources now.”

The “take-out” per-share price represented a 64% premium to Monday’s close of $11.99. In the wake of the news, not only did Miranda stock rise to meet the offer, but so did Belden’s. It opened at $30.55 on Tuesday, the day of the announcement, and was trading this morning around a dollar higher.

Although Belden is not looking for cost synergy, it is expecting some commercial synergy. For instance, Stroup said, Belden and Miranda have many common customers, but Miranda is typically invited in on a job significantly before Belden. So, by tying in with Miranda, Belden can get in on some business it might otherwise miss.

“We have seen that play out already successfully in the industrial side of the business. We’re confident we will see it here as well,” Stroup said.

Robert Young, a analyst who covers Miranda for Canaccord Genuity, said that the Belden offer of $17 is “fair” — a little more, in fact, than what he had calculated based on recent sales of similar companies.

Young expects the Belden deal to go through without competing bids. “There are a number of companies in the networking space that might take a run, but I would say the probability is low.”

In a note to her clients, Sera Kim of GMP securities called the deal a “positive outcome” of Miranda’s strategic review process. She too endorsed the price, saying it is at the mid-point of the $15-$20 range she had anticipated.

Belden plans on sending its tender offer to shareholders within 10 days with a 35-day deadline and its hopes to close by July 24. Belden said it placed no financial conditions on the deal, noting that it currently has sufficient cash and committed financing to close.

Miranda is on the hook to Belden for $19 million if the deal is not consummated “in certain specified circumstances.”