Six years after the U.S. company Cisco Systems bought Israel-based NDS from the U.S. private equity firm Permira for $5 billion, it’s selling it back to the same company for what sources said was just a fifth of the price it paid.
Permira said on Tuesday it was buying back the business, which had operated as Cisco’s video software unit, for an undisclosed price. But sources told Reuters the fund was paying just $1 billion for the business.
Under its new ownership, the unit will focus on developing video software for the pay-TV industry and named video industry veteran Abe Peled as chairman. No name for the new standalone company has been chosen.
Peled was CEO of the business before Cisco bought it from Permira and Rupert Murdoch’s News Corporation to Cisco in 201 and had been serving as a Permira adviser since then.
NDS’s products are used to send interactive content to television set-top boxes, digital-video recorders and mobile phones . Its customers include Sky TV in the UK, AT&T’s DirecTV, Vodafone in Germany and China’s state satellite TV. Permira is not acquiring video and media technology Cisco is using for its networking, multi-cloud, security, data and collaboration services.
“The new company will include NDS’s core assets in addition to what Cisco had developed and has merged into its NDS unit over the last six years,” Peled said.
Formed 1988 in Israel, the business underwent changes over the years. As a startup called News Datacom, it commercialized technology developed by the Israeli cryptographer Adi Shamir and his partner Amos Fiat for use in encrypting satellite broadcasts.
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New Corporation bought the company in 1992 for $15 million and renamed News Digital Systems. When Cisco bought NDS in 2012, it was one of its biggest acquisitions ever, but as it turned out one of its worst.
NDS became part of Cisco’s service-provider video unit, which has seen its revenues decline since 2014 as traditional subscription-based TV services that rely on satellite set-top boxes face increased competition for viewers from streaming services provided by Netflix and Amazon.
The unit is now headquartered in Britain and counts about 3,500 employees, including about 600 at its research and development center in Jerusalem. Peled said the Israeli R&D operation was important to the company and hopes to see it grow.
“We intend to invest in new areas, like protecting content on the Internet and preventing pirate broadcasts. The huge knowledge base in Israel in cybersecurity will contribute to this,” Peled said. “Beyond that, television remains a great advertising format and here, too, we will work to develop for measuring advertising.”
Peled could not say what exit strategy Permira will choose for the business.
“You focus on the company doing well and creating value and when the time comes the exit strategy will present itself, whether it’s an IPO or another private equity firm or a strategic acquisition,” he said.