Broadcast Communications Division soon will have a new owner. Barring some
unforeseen complication, the transfer to The Gores Group LLC will be finalized
early this year.
Website of The
announcement settles uncertainty over Harris Broadcast’s immediate future. Now
the focus moves to questions about how the owner will operate the long-time
manufacturer of radio and TV transmitters, STL equipment, consoles and other
Corp. met its self-imposed year-end deadline of selling the division in early
December. It reached an agreement to sell the division for a package worth up
to $225 million. Gores is a private equity firm that has a variety of holdings
including a partial stake in syndication giant Dial Global. Its founder has
been described as a “fixer-upper” and once said he has a “formula to save
companies” (see sidebar).
President Harris Morris wrote to employees: “Being owned by The Gores Group as
a privately-held company will enable Harris Broadcast to capitalize on our
market-leading position, continue to pursue growth opportunities, and
aggressively respond to continually evolving market trends and customer needs.”
sale price includes $160 million in cash at closing, which is expected to take
place early in 2013. Some broadcast observers questioned the price, calling it
low in light of past Harris purchases to bulk up. For example, Harris spent $340 million to acquire Encoda Systems in 2004
and $450 million to acquire Leitch Technologies in 2005.
a note to clients, Devoncroft, a market research firm, compared the cash
portion of the deal to a price of $200 million or more that Harris Corp. CEO
William Brown had telegraphed to the market. As recently as October, officials
had put a net book value of $287 million on the company’s broadcast
communications business, which Brown said at the time “gives an indication of
the value we expect to receive” from the sale, according to Devoncroft. The
analyst speculated about whether Gores Group might use Harris Broadcast as a
platform for further expansion into the broadcast industry or break up the
division and sell it off.
and a great team’
Gores Group didn’t comment publically on the purchase other than a press
release statement from Ryan Wald, managing director of The Gores Group: “In
Harris Broadcast Communications, we are investing in a proven technology leader
with great products and a great team. We are excited to provide the capital and
support to transition this division to a strong and independent company further
enabling it to continue developing and delivering market leading technologies.”
Morris remains with Harris Broadcast, as does
the rest of the executive staff, Morris said.
President Harris Morris calls The Gores Group a ‘well-capitalized owner.’
Broadcast headquarters will remain in Englewood, Colo. Its facilities in Quincy, Ill., Mason, Ohio, and
all others will be retained, Morris said. Harris Broadcast has 15 U.S.
locations and 29 more in Canada, Mexico and other countries.
shifted to Englewood from Mason around 2010; Harris officials say many of its
broadcast executives are based in Denver, along with a large part of its media
software business operation. The Mason office handles business operations for
the transmission business unit. Quincy is transmitter manufacturing. Other
notable operations include the Toronto, Canada, office housing a majority of
the business operations for the workflow, infrastructure and networking
business unit; and the Pacific Design Center for PR&E studio solutions, in
division had some 1,700 employees as of late last year.According to a story in the Quincy Herald-Whig newspaper, there were 348
employees at the Quincy facility when the company announced its intentions to
sell early last year. There were layoffs there in the fall prior to the sale; at
least 17 were laid off in November. Some observers confirmed to Radio World that
some senior engineer positions were among those eliminated.
Gores has ‘expertise’
An image of the transmitter assembly line at the
Harris Broadcast facility in Campinas, Brazil.
Morris will report will report to a Gores board. The company also has sought
out satellite television executive Carl Vogel as a
expects service and support of its products will not suffer through the
ownership transition, though he acknowledged that the broadcast market
historically doesn’t react well to disruption and uncertainty.
“We have a
well-capitalized owner that’s very committed to this business and space, and
it’s going to help us keep a steady hand on the tiller,” he said. “Harris will
keep driving great service, support and continued innovation. Early customer
reaction is very positive.”
said Gores was looking for a “strong broadcast brand to add to its media
portfolio,” which includes Dial Global. The latter calls itself America’s
largest provider and distributor of audio content to 8,500 radio stations.
believes The Gores Group brings expertise that will help accelerate some of the
division’s goals “as well as help us carve out cleanly from Harris” without
bumps. Gores will bring “operational expertise” and “sector expertise” to manage
the exit of the broadcast division from the umbrella of Harris Corp.
Gores Group thinks Harris has a great deal of growth potential, with a lot of
growth coming from abroad,” he said.
Who Is the Gores Group?
The Gores Group, founded by Alec Gores in 1987, is a private equity firm with approximately $3.3 billion in assets under management. The firm is headquartered in Los Angeles with offices in Boulder, Colo., and London.
The investment firm has acquired and operated 60 companies since its founding, according to its website. It acquired Westwood One radio network in 2008 and reduced costs by $65 million before merging the company with Oaktree Capital’s Dial Global in 2011, the site states. Gores Group still holds approximately 35 percent ownership in Dial Global.
Its portfolio of technology, telecommunications, health care and entertainment holdings now includes Harris’ broadcast division. The Gores Group currently owns or has an interest in Siemens Enterprise Communications, Sage Automotive Interiors, Scovill Fasteners and Stock Building Supply.
Founder Alec Gores, 58, has been described as a “fixer-upper” and told USA Today in a 2002 interview that he has a “formula to save companies.” The firm’s single vision is to “buy, fix and sell businesses,” according to the website.
The Gores Group declined further comment, citing the fact that its deal with Harris has yet to close. The parties expect that to happen early this year.
Alec Gores, 59, was ranked 250th on the Forbes 400 list of the richest Americans in 2012 with an estimated wealth of $1.9 billion, according to his profile on LinkedIn.
products will retain the Harris name for three years before being rebranded.
getting into specifics, Morris said the company is working on product releases
to unveil at the spring NAB convention. In digital radio, it remains excited
about HD Radio products, he said. “I think we are quite happy those products,
such as the Flexiva line. Those things are growing nicely and doing well.”
employees have handled the stress of the sale process well. “We tried to make
this as uncomplicated as possible. Uncertainty always brings stress. At the
same time our team here was very patient. They believe in our vision and
products. [Employee] reaction has been very positive to the sale.” In a letter
announcing the sale, he thanked the staff for the loyalty they exhibited as the
Harris Corp. announced its intentions to sell the broadcast
division in May 2012; officials explained the decision was based on a six-month
review that showed broadcast had become less aligned with its core business and
long-term strategy. At that point, Harris Broadcast was classified as a
At one time Harris reported financial results for the
broadcast division separately, but in 2011 it rolled its broadcast business into a
segment called Integrated Network Solutions. A
report by Devoncroft last summer said Harris’s third quarter 2012 sales were
$111 million, a decline of 14 percent from the same period in 2011.
Corp., which worked with investment banker Morgan Stanley to manage the sale of
the division, never characterized the level of interest from potential buyers.
Some broadcast industry observers had pointed to the San Francisco-based
private equity firm Francisco Partners as a potential suitor. The investment
group acquired Grass Valley, which produces technology and services for the
video and TV industries, in 2011.
“I can’t share how many companies wanted to
bid. Scores of companies were interested and dozens submitted initial
indications of interest,” Morris said. “There were companies who wanted pieces
or the whole thing.”
One prominent industry observer, Vice President of
Radio Engineering for Greater Media Milford Smith, said he’s pleased a deal is
now complete, with a seemingly well-funded buyer.
are understandably hesitant in some case to purchase equipment with
long-anticipated lifetimes not knowing the ‘lifetime’ of the manufacturer,”
said Smith. “Hopefully this announcement puts that uncertainty to rest and both
the Harris Broadcast Division and the industry can move forward with confidence
in their business dealings.”
Those in the
radio broadcast equipment manufacturing space followed developments surrounding
the sale. Broadcast Electronics officials acknowledged being interested in
parts of Harris Broadcast.
The Gores Group likely will make operational
improvements looking to find synergies, reduce costs and raise cash, according
to Broadcast Electronics President/CEO Joe Roark.
could be further workforce cuts and consolidation at Harris. The culture at
Harris will likely be one of absolute performance,” Roark said.
He too expressed surprise at the cash price
considering the company had spent hundreds of millions of dollars acquiring
brands like Encoda Systems and Leitch Technologies in the past decade.
$160 million cash price is low but an indication of how tough the broadcast
manufacturing industry is right now. There is a $15 million promissory note and
another $50 million bump based on future performance, but the cash payment
might be about all the Gores Group has to pay,” Roark said.
has long held a position of significance within the broadcast equipment market.
Harris Intertype Corp. purchased Gates Radio
in 1957 and entered the TV transmitter market in 1969. It later added
Intraplex’s STL business and Pacific Research & Engineering consoles.
Broadcast consists of four business divisions: transmission; media software;
workflow, infrastructure and networking; and digital out-of-home, according to
transmission unit includes radio and TV transmission products, exciters,
PR&E studio consoles, networking solutions, studio furniture and Intraplex
STL systems and IP codecs. It encompasses digital radio solutions for HD Radio,
DRM/DRM+ and DAB. The
unit’s large television transmission portfolio includes analog and digital
transmitters for LPTV, medium-power and high-power and Mobile DTV solutions.
software portfolio includes traffic and billing software, business intelligence
and analysis software and digital asset management.
workflow, infrastructure and networking business unit includes servers, routers,
multiviewers, signal processing and distribution, video networking, audio
solutions (including loudness control) and test and measurement. The digital
out-of-home division covers digital signage solutions and serves markets
outside of broadcast like retail, hospitality and sports venues, according to