Category: Uncategorized

Rogers doubles down on Canadian datacenter market

Scott Denne

Contact: Scott Denne Michael Levy

Canadian telecommunications company Rogers Communications seems to be on a datacenter M&A roll, buying Pivot Data Centres and Granite Networks today for a combined $158m. The deals are Rogers’ second and third datacenter acquisitions of the year. However, we don’t expect a fourth by year’s end.

Rogers is spending a combined $158m (C$161.5m) on two datacenter vendors – Pivot Data Centres for $151.5m and Granite Networks for $6.1m – which is on top of the $196m it already paid for BLACKIRON Data in April.

As Rogers and its peers have looked for new services to make up for lost landline revenue, the Canadian datacenter sector has undergone significant consolidation in the past two years, leaving few available premium assets in the market. With its reach for Pivot and Granite, Rogers buys two of the last ripe assets in Canada. Most of the remaining datacenter providers in Canada have aging infrastructure or small amounts of space.

The short supply in Canada seems to have driven up prices for hosted services companies. Consequently, we understand that the sale of Pivot was a competitive process, bringing out bids from other strategic, as well as financial, acquirers. We hear the company is being valued close to BLACKIRON, which Rogers bought for 15.1x 12 month-trailing EBITDA.

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Western Digital keeps up its flashy spending

Scott Denne

Contact Scott Denne  Tim Stammers

Disk drive giant Western Digital is making its third – and largest – acquisition of a flash storage company this year, handing over $685m in cash for Virident Systems. The purchase brings the company’s total tab on spending in the fast-growing market to more than $1bn.

Earlier this year, Western Digital agreed to pay $340m for flash drive vendor STEC, as well as an undisclosed amount for VeloBit, an early-stage maker of software for boosting the performance of flash drives. That’s on top of the $4.25bn it spent in early 2011 on Hitachi Global Storage Technologies, a deal that was driven in part to help Western Digital get into the enterprise flash market.

Virident brings Western Digital PCIe flash cards (essentially flash drives that are used for high-performance applications) and related software. Virident is an early-stage company and Western Digital doesn’t expect it to be accretive until 2015. Subscribers to The 451 M&A KnowledgeBase can see our full record and estimates of Virident’s revenue.

The sinking cost of flash and rising demand for faster storage is leading to a growing market for enterprise flash at the expense of traditional hard disk. According to TheInfoPro, a service of 451 Research, 17% of IT departments plan to increase their spending on flash memory in servers (Virident’s specialty), up from just 8% that planned to do so in 2012.

Western Digital has been far more aggressive than its competition in the flash sector. For instance, SanDisk launched itself into the flash disk market two years ago with the $327m reach for Pliant Technology and, more recently, the $307m pickup of another flash disk provider, SMART Storage Systems. Western Digital’s main rival, Seagate, has yet to ink a deal in flash; however, it did make a $40m investment in Virident earlier this year.

Recent deals by disk drive companies

Date announced Acquirer Target Deal value
September 9, 2013 Western Digital Virident Systems $685m
July 10, 2013 Western Digital VeloBit Not disclosed
July 2, 2013 SanDisk SMART Storage Systems $307m
June 24, 2013 Western Digital STEC $340m

Source: The 451 M&A KnowledgeBase

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Breaking up the M&A way

Ben Kolada

Contact: Ben Kolada

Though previously engaged in a joint venture (JV) named Monitise Americas, mobile banking startup Monitise and Fidelity National Information Services (FIS) have been growing apart. Through a series of moves, the two companies, though still partners, seem to be getting ever closer to completely severing their relationship.

The eventual breakup appears to be spearheaded by Monitise. For just over three years, Monitise and FIS owned a JV named Monitise Americas. However, in November 2011, Monitise brought the JV completely under its own control, perhaps as a prelude to its next major M&A play.

Following the severing of that venture, FIS threw its weight behind Monitise competitor mFoundry, participating alongside MasterCard and existing investors in an $18m round of financing for mFoundry that was disclosed in December 2011. Not only was FIS’s involvement here a competitive slap in the face, but the inclusion of MasterCard in the round put another nail in the coffin, as MasterCard rival Visa and its affiliates have been longtime investors in Monitise.

In response, just three months later, Monitise announced its $173m all-stock acquisition of North American counterpart Clairmail. Clairmail was a direct competitor to mFoundry, similar in both headcount and product portfolio.

With tension mounting, FIS recently announced that it is acquiring the remainder of mFoundry that it doesn’t already own for $120m in cash. If the relationship between FIS and Monitise continues, it certainly won’t be as amicable as before. Although Monitise still called FIS a partner in its most recent annual report (released in September 2012), the feeling may no longer be mutual.

Breaking up the M&A way

Date Event
November 2011 Monitise buys out the remainder of Monitise Americas that it didn’t already own from FIS.
December 2011 FIS invests alongside MasterCard in Monitise competitor mFoundry.
March 2012 Monitise acquires mFoundry rival Clairmail for $173m.
January 2013 FIS acquires the remainder of Monitise/Clairmail competitor mFoundry that it didn’t already own for $120m.

Source: The 451 M&A KnowledgeBase, 451 Research

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

Honeywell acquires struggling Intermec

Contact: Tejas Venkatesh

After forecasting 2013 growth below Wall Street expectations, Honeywell today announced the acquisition of RFID and retail systems provider Intermec Technologies for an enterprise value of $600m. The deal helps the diversified conglomerate add voice and barcode technologies, and bulks up its core scanning and mobile computing business.

Intermec hasn’t turned a profit since 2008 amid declining revenue. For the 12 months ended September 30, Intermec reported revenue of $810m, below its fiscal 2008 revenue of $891m. And six weeks ago, the company announced that it had retained Bank of America Merrill Lynch as its financial adviser. The deal values Intermec at 0.7x trailing sales, right in line with Motorola Solutions’ pickup of Psion in June for an enterprise value of $162m, or 0.6x trailing sales.

The acquisition is Honeywell’s fourth of 2012, according to The 451 M&A KnowledgeBase, and comes soon after the company forecasted 2013 growth below analysts’ expectations, due to defense cuts and slow economic growth. Honeywell projected 2013 revenue of $39-39.5bn, while analysts on average expect $39.4bn.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

Ruckus debuts amid equity market uncertainty

Contact: Tejas Venkatesh

Even as the equity markets have been roiled by uncertainty and slowing corporate growth recently, Ruckus Wireless made it public on Friday. After pricing at the high end of its indicated range of $13-15, the stock edged lower in midday trading. Nevertheless, the Sequoia Capital-backed wireless provider raised $126m and debuts at a market cap of $1.1bn, valuing it at 5.7 times trailing sales. The robust value creation comes at a time when network operators are looking to Wi-Fi networks to offload data traffic that is crowding their wireless 3G and 4G/LTE networks.

With its Wi-Fi wares, Ruckus is capitalizing on concerns about how to handle the rapid expansion of traffic generated by mobile devices. High-performance wireless is clearly in high demand and Ruckus specializes in large-scale deployments that suit high-volume and high-density applications.

And Ruckus’ growth reflects that market opportunity. The 10-year-old company has more than doubled its top line in less than two years, going from $75m in calendar-year 2010 to $194m for the 12 months ended September 30. And even while ramping up sales and marketing, Ruckus has been running solidly in the black for two years. It raised $76.1m in venture funding from Sequoia Capital (which holds a 24% stake) and Motorola Mobility Ventures (5.4% stake), among others. Goldman Sachs and Morgan Stanley were lead underwriters on the offering.

Ruckus has established itself as a distinct player in the crowded Wi-Fi market, and competes against bigger vendors like Cisco Systems, Ericsson, Hewlett-Packard, Motorola Mobility and Aruba Networks. Unlike Cisco and HP, Ruckus builds its devices using standard chipsets from Qualcomm’s Atheros and then uses its own intellectual property to more effectively manage the radios and data operations to improve performance.

The wireless startup’s successful offering comes less than a year after its archrival BelAir Networks was snapped up by Ericsson. While both companies were born at the same time in 2002, Ruckus was clearly the more successful of the two. BelAir had 120 employees at the time of its sale and Ruckus has five times that number, at 606.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

Akamai bets on future growth from service providers with Verivue buy

Contact: Tejas Venkatesh, Jim Davis

In its quarterly results three weeks ago, Akamai reported impressive numbers driven by the media and entertainment vertical. Its acquisition of Verivue, a video-switching and delivery platform provider, signals a new path for continued growth in the segment.

Even though Akamai has been developing a licensed software solution for the service-provider market, the acquisition of Verivue’s technology (and engineering staff) helps get Akamai further along by virtue of having already been deployed in the field with companies like Cox Communications in the US and some smaller ISPs in the Asia-Pacific region.

Terms of the deal were not disclosed. Six-year-old Verivue has 60 employees and raised quite a bit of venture capital. Five venture firms and three strategic investors together funneled $85m into Verivue. Investors include Accel Partners, Matrix Partners and Comcast, among others.

The acquisition comes barely three weeks after Akamai reported its best quarterly results ever, with its top line increasing 23% year-over-year to reach $345m. Revenue from the media and entertainment segment grew fastest at 26%, driven in part by the Olympic games, when broadcasters used Akamai’s HD network to deliver high-quality video at scale.

ASML acquires Cymer to accelerate next-gen manufacturing technology

Contact: Thejeswi Venkatesh

Dutch company ASML Holding, which supplies lithography systems to chip manufacturers like Intel and Texas Instruments, has announced the acquisition of its own supplier Cymer for $2.5bn. ASML integrates Cymer’s light sources into its lithography tools, which it then sells to chipmakers.

ASML says the acquisition accelerates the development of next-generation manufacturing technology, which is needed to create energy-efficient microchips with more functions at a lower cost. The deal comes just three months after Intel invested $4.1bn in ASML to speed the development of advanced manufacturing tools.

Cymer shareholders will receive $20 in cash and 1.1502 ASML shares, valuing each Cymer share at $81.60, which is their highest-ever price. It’s also an eye-popping 70% premium over the company’s Tuesday close, and values it at 4.3 times trailing sales. On the announcement and a relatively weak financial outlook, ASML stock dipped 8% on heavy trading.

The deal is only ASML’s second and largest ever, according to The 451 M&A KnowledgeBase. In December 2006, ASML bought EDA tools vendor Brion Technologies for $270m.

Comments requested

Ben Kolada

Contact: Ben Kolada

Comment aggregation and social engagement startup Livefyre has been busy lately. The company recently moved into a larger office and just launched a new product. Meanwhile, its 29-year-old CEO is hitting the fundraising circuit, hoping to secure additional VC financing to propel its growth.

Livefyre was founded by Jordan Kretchmer in 2009 with the mission of aggregating comments from social networking outlets on publishers’ websites. However, the startup has expanded beyond that. Its StreamHub product, which recently made its commercial debut, provides a real-time blogging and chatting platform to publishers. It aggregates comments, videos and images from social networks using customizable widgets. The company is also making a push to expand beyond its publishing customer base toward brands.

Livefyre is serving a niche of the greater digital marketing industry, and its products still have room for improvement, but publishers and brands are already finding value in what it offers. The vendor’s partners include WordPress and Google. It’s projecting $10m in bookings for this year.

To aid future growth, Livefyre is taking its message to venture investors. To date, it has raised $5.3m in venture capital from Greycroft Partners, Cue Ball, Hillsven Capital, Zelkova Ventures and ff Venture Capital. Livefyre wouldn’t comment on the amount it’s hoping to secure in its C round, but by this stage companies typically look for $5-10m. The financing will be used for hiring, product development and marketing and sales. Livefyre expects to close the round by year-end.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

Persistence pays off for Ramtron

Contact: Thejeswi Venkatesh

Chipmaker Cypress Semiconductor has finally snagged Ramtron. After more than a year of chasing its smaller rival, Cypress has announced a definitive agreement to acquire Ramtron for $110m. It is Cypress’ first acquisition in four years, and its largest ever. The deal comes after Ramtron’s board publicly rejected two previous increased offers.

While Ramtron’s shareholders were surely at the edge of their seats while the saga played out, they will be happy with the outcome. The final offer, which values Ramtron at 1.6 times trailing sales, is a handsome 25% more than Cypress’ initial public bid of $87.6m. And it was about 70% higher than where Ramtron shares were trading on their own before Cypress’ acquisition offer.

The outcome also reminds us of fellow chip designer Microsemi’s purchase of Zarlink in September 2011. After six months of courting and two rejections, Microsemi finally bought Zarlink for $525m. That represented a 15% premium over the initial bid.

Traditional advertising firms busy buyers of online agencies

Contact: Brian Satterfield

In order to spread their clients’ messages to as many people as possible in every corner of the globe, old-line advertising firms are increasingly bolstering their online presence by acquiring purely digital agencies.

In the past three years, traditional companies have been the buyers in 86, or almost 20%, of the nearly 450 transactions we’ve recorded in the Web marketing and design sectors. As one might expect, several of the world’s largest publicly listed mega-agencies have been especially busy with buying their online counterparts.

In mid-May, Paris-based Publicis Groupe inked its fourth deal of the year when it reached into China for Longtuo, a Web marketing and design services provider with 200 employees. Publicis Groupe is certainly a steady user of M&A to build its international client base, having purchased 23 Web agencies in almost a dozen different countries since its first buy in 2006. In fact, Publicis Groupe had its busiest M&A year on record in 2011, with seven announced acquisitions, all of them in the Web marketing industry.

Nasdaq-listed WPP Group and its wholly owned subsidiaries have taken a similar approach to Web marketing and design deals, but on a slightly larger scale. Yesterday, WPP subsidiary JWT picked up India-based Hungama Digital Services, a Web marketing and design firm with a headcount of 110. Since 2005, the entities have combined to buy a total of 40 companies in nearly 20 countries. Up until 2008, WPP was almost exclusively focused on strengthening its Web design skills, but has since devoted most of its M&A firepower to acquiring companies primarily devoted to online marketing. Like Publicis Groupe, WPP is off to a busy buying start in 2012, having already made eight different purchases in the sectors via its primary business and six distinct subsidiaries.

One key way in which the two competitors have diverged is how often they are willing to spend big bucks. Publicis Groupe has made three $500m-plus plays, its largest coming in 2006, when it dropped $1.3bn on then-Nasdaq-listed Web design agency Digitas. Meanwhile, WPP has only publicly disclosed one deal value, its $649m purchase of Web developer 24/7 Real Media in 2007.