Ericsson has decided to sell 51% of its media solutions business to a private equity partner but will retain control of its broadcast and media services business, Red Bee Media, saying that offers for the business did not reflect its value.
After ten months of reviewing its options, including sales, partnerships, or retaining the business units, Ericsson will spin off its media solutions arm but retain the services operation, at least for the present.
Ericsson and One Equity Partners will form an independent company to develop the media solutions business, with the private equity company taking a 51% share. The terms of the deal, which is expected to close in the third quarter of 2018, were not disclosed.
One Equity Partners describes itself as a middle market private equity firm with over $4 billion in assets under management in the industrial, healthcare and technology sectors.
The Ericsson media solutions unit includes various previous acquisitions, notably Tandberg TV in 2007, Microsoft Mediaroom in 2013, as well as Azuki and Fabrix in 2014 and Envivio in 2015, which it attempted to integrate into a portfolio of video products.
Ericsson developed its own MediaFirst television platform but failed to achieve much impact on the market. The video strategy did not bring in significant new business, while Ericsson faced strong competition in its core telecommunications sector. Meanwhile, many operators were putting together their own multiscreen systems.
On completion the media solutions business will be positioned as an independent video hardware and software technology vendor. It says it delivers its products and services to 9 of the top 10 global telecommunications, cable or satellite operators and 8 of the top 10 broadcast companies. Over 18 million television subscribers in 26 countries use its television platform.
“The work we have done to integrate and advance our end-to-end roadmap is paying off in strong customer engagement,” said Angel Ruiz, who will continue to lead the business as chief executive. “One Equity Partners brings valuable experience in the media and telecom sectors, and we’re confident that we have found the right partner to further develop and grow the business.”
Börje Ekholm, the president and chief executive of Ericsson, said that retaining a 49% share “allows us to capture the upside of the business while at the same time taking active part in the expected consolidation of the industry”. He said Ericsson would retain Red Bee Media as an independent entity “as the bids received did not reflect the value of the business”.
Red Bee Media provides services to the BBC and ITV among other broadcasters, delivering 2.7 million hours of programming in more than 60 languages across nearly 600 television channels. It employs 2,500 people worldwide. It made an operating loss of over £26 million in 2017 on revenues of around £223 million.
Ericsson completed the acquisition of Red Bee Media in 2014 from a consortium led by Macquarie in 2014, which had previously acquired the former BBC Broadcast business in 2005.
The Red Bee Media brand was restored in late 2017 and the business has been legally separated, providing the option to sell it in the future.
“Our focus is now on improving and transforming Red Bee Media, in partnership with our customers, to enable our full potential as an independent and focussed media services business,” said Steve Nylund, the chief executive of Red Bee Media.
Ericsson clearly has bigger issues to address, reporting an operating loss of £3.4 billion for 2017 on sales of around £18 billion, which were 12% down year on year.