ADB acquires Pirelli Broadband Solutions

GENEVA — Advanced Digital Broadcast Holdings SA (SIX: ADBN) gave today an update on its business.

Acquisition of Pirelli Broadband Solutions (PBS)

Today, ADB Group and Pirelli & C signed an agreement on ADB’s acquisition of 100% of the shares of Pirelli Broadband Solutions (PBS), a company fully owned by Pirelli & C. ADB Group will pay Pirelli a consideration consisting of EUR 14 million cash and 400’000 shares of ADB Holdings SA, totalling to approximately EUR 22 million at the current ADBH share prices. In addition, the transaction will include also the amount of EUR 8 million of the PBS agreed net cash position, which brings its total value to EUR 30 million. The consideration shares will come out of ADB Group treasury, and thus the transaction will not be dilutive to the shareholders. The parties have agreed on a put (Pirelli) and call (ADB) mechanism, exercisable within two years, while Pirelli will also observe an initial two-month lock-up period on the sale of ADBH shares. The closing is expected to take place as soon as the transaction has been cleared by the relevant anti-trust authorities.

Pirelli Broadband Solutions supplies broadband gateways, IPTV set-top boxes, fixed/mobile convergence devices and broadband systems management solutions to the telecom operators in Europe and Latin America. Positioned among the top four vendors of broadband access devices in EMEA, PBS has extensive knowledge of broadband networks technology, including both the customer premises equipment (CPE) as well as networks and their management. Its product line includes broadband access devices such x-DSL and fiber-to-home gateways, IPTV and hybrid set-top boxes, and software for the broadband platforms. PBS has been the main supplier to most of telecom operators in Italy, and over the last few years has expanded its business into other European and Latin America countries. The company’s 2009 revenue was EUR 132 million, while its first-half 2010 revenue reached around EUR 58 million. The company is based in Milan, Italy.

ADB Group has put consumer experience and multimedia convergence at the core of its strategy, as it believes that pay-TV and telecom services are set to converge towards offering consumers powerful tools for accessing their multimedia content, whatever the source of it, or the devices they choose to enjoy it on. ADB has been therefore successfully focusing on high-end and hybrid devices, as well as on software that enhances consumer experience and facilitates convergence: its Carbo user interface and its Virtual Gateway platform are the two most recent major strategic milestones.

Acquiring PBS is an important step in ADB Group’s execution on its strategy: the Group will gain an important piece of communication technology and product that fits nicely into its overall vision of converging multimedia. In the near term, the acquisition will also add significantly to the Group revenue.

Francois Pogodalla, CEO of ADB S.A., commented: “The acquisition of PBS helps us to strike to the core of convergence of pay TV and IP-based, multimedia, and multiscreen services. It brings us a complete portfolio of broadband gateway products and know-how which we will combine with our pay TV set-top boxes, our Virtual Gateway home networking platform, and our Carbo user interface. We will be in a position to deliver to operators an end-to-end, converged multi-service set of solutions based on open-standards and interoperability. We see this acquisition as a clear increase of our overall strength, both in the marketing and sales as well as in the R&D areas.”

ADB Carbo™ is ranked best software for pay-TV applications

In September, the Carbo™ high definition user interface won a significant recognition with Best Interactive TV Technology or Application award from CSI 2010. It is the first time ADB Group has won in the software category, and as such this marks an important milestone. The Group also won Best Customer Premise Technology categories and its 5720SX three-way hybrid platform from CSI. Furthermore, the Group was crowned with Best Platform Receiver Award at Satkrak, Poland in October.

Current business overview

The demand from IPTV and satellite segment continued to drive a significant part of the Group revenue during the third quarter. Business from the cable segment remained somewhat weaker, largely due to the shift in one of the key customers ordering patterns. The terrestrial segment is falling behind expectations due to the delays in the analogue switch-off in Italy and the slower than anticipated market development in the UK and Spain, mainly due to the economic downturn in those countries. Consequently the Group expects the revenue to decline slightly this year.

High-definition products contributed approximately three quarters, and PVR products a majority of the Group product sales. Hybrid products continue to form the mainstream of the Group product sales, and are clearly seen as a very attractive value proposition to many pay-TV operators. The user interface, Carbo™ continues to win new customers, and is becoming an industry benchmark with its super-fast channel change and clear, intuitive navigation.

The business model of the Group remains very resilient. Group’s profitability is envisaged to remain at the same level as anticipated in the beginning of the year, due to the scalable cost structure and effective cost control, despite slight decline of the revenue in this year. The Group notes that the component shortage has eased out somewhat, but component lead times remain longer than usual. This will lead some of the orders to be delivered during early 2011 instead of 2010; the management observes that no orders have been lost or cancelled due to this situation. The Group continues turning around its product portfolio, where new products already contributing clearly to the sales. The business development has progressed favourably during the third quarter, and is creating new opportunities for the future years.

Andrew Rybicki, Chairman and CEO, stated: “Acquisition of Pirelli Broadband Solutions is a truly important step in development of our multimedia convergence strategy. It will allow us to accelerate our plans by integrating a successful broadband communication business with our core activities. It will also allow us to reach a new scale of our overall business, bringing it over half-a-billion dollars. At the same time, our highly scalable organization and business structures give me comfort that the integration process will be carried out seamlessly and efficiently, to the benefit of the company and its shareholders. I look forward to this new endeavour with both thrill and confidence.