EC OKs Cisco’s NDS purchase
July 24, 2012
By Colin Mann
The European Commission has cleared under the EU Merger Regulation the proposed acquisition of pay-TV technology specialist NDS Group by Cisco Systems.
The Commission’s investigation confirmed that the merged entity would continue to face competition from a number of strong competitors and that customers, namely pay-TV providers, would continue to have alternative suppliers in all markets concerned.
The Commission examined the effects on competition of the proposed acquisition in the sector of pay-TV technical services. The Commission’s assessment focused in particular on the provision of hardware components, such as set-top-boxes (STBs), and software components. These include Conditional Access Systems (CAS), Digital Rights Management (DRM) software, middleware software, application software including digital video recording (DVR), electronic programme guides (EPG), content management systems (CMS) and home provisioning software (HPS).
The EC says there are only limited overlaps between the parties’ activities in relation to each of these hardware and software products at the worldwide level and these overlaps are even smaller in the European Economic Area (EEA).
It did note certain vertical and conglomerate relations, particularly between NDS’s pay-TV software activities and Cisco’s STB activities. However, the Commission’s investigation confirmed that the merged entity would not have market power in the relevant markets and would therefore not have the ability nor the incentive to raise the costs for its competitors in STB or pay-TV software or to exclude them through bundled offers of the different components of pay-TV technical services.
The Commission therefore concluded that the transaction would not raise competition concerns.
Cisco March 16 announced its intention to acquire NDS for approximately $5 billion, including the assumption of debt and retention-based incentives.
At the time, John Chambers, Chairman and CEO, Cisco, said the company’s strategy had always been driven by customer need and on capturing market transitions. “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 was established in 1988 as an Israeli start-up company, and was acquired by News Corporation in 1992. In 2009, Permira and News Corporation announced a $3.6 billion arrangement for buying the public holding in NDS, turning it into a privately held company. Permira holds 51 per cent, and News Corporation approximately 49 per cent.
In December 2011, NDS filed with the SEC to raise up to $100 million in an initial public offering.