Digital and fibre optics systems company Harmonic Inc has agreed to acquire the Divicom business of C-Cube Microsystems Inc for $1.7bn in stock, based on Tuesday’s closing price. Milpitas, California-based digital video chip maker C-Cube originally acquired privately-held Divicom Inc back in 1996 for $143m. Since then, Divicom has built up its digital video compression business, now a key component for internet over cable systems. As part of the deal, C-Cube has agreed to spin-off or sell its semiconductor business in a taxable transaction, prior to the closing of the merger.
Harmonic, based nearby in Sunnyvale, says the buy will position it as a major supplier of open systems products for delivering video, voice and data over a variety of network architectures. Combining DiviCom’s MPEG-2 encoding products with Harmonic’s fibre optics will expand the company’s digital and optical offerings for cable companies, and enable it to expand penetration into telecommunications, satellite, wireless and other emerging markets for broadband communications, Harmonic said. A longer term goal is video transmission over IP networks.
DiviCom has 425 employees. An impressive list of customers include BellSouth, CCTV, CableVision Systems, Canal+, DirecTV, EchoStar Communications, GTE, MediaOne, NTL, Telenor, Telia and US West. For the nine months ending September 30, the division posted $133.8m in revenue and $20.5m in profits. The merger, subject to approval, is expected to close in March 2000, and will be accounted for as a purchase.
Under the terms of the deal, C-Cube shareholders will receive, in exchange for each share of C-Cube stock, 0.5427 shares of Harmonic stock, as well as spun off shares from the semiconductor business, or net, after-tax proceeds of any sale of the semiconductor business. C-Cube Semiconductor sells chips and Codecs to the digital video marketplace for DVD players and set top boxes.
