Is Envivio Really Worth $125 Million?

Ericsson is looking for this acquisition to strengthen it as a global innovator in enabling customers to deploy new technologies and agile video processing to innovate new services that engage TV consumers every day.

The board of directors of Envivio has unanimously agreed to recommend that Envivio’s stockholders tender their shares to Ericsson in the tender offer. The acquisition is expected to close in the fourth quarter of 2015, subject to customary closing conditions.

For some background, Envivio is a global leader in software-based video encoding with an installed base of over 400 TV service provider and content owner customers in all markets globally. During the 2014 full year, it generated $43 million in revenue, and its customers include Comcast, Liberty Global and Time Warner.

Per Borgklint, senior vice president and head of Business Unit Support Solutions at Ericsson, commented on the acquisition:

Our consumer research clearly shows that viewers are demanding TV on their terms on any device, and expecting experiences that continually evolve. We are committed to offering our customers a clear path towards fully agile cloud agnostic platforms that delight TV consumers. I look forward to welcoming the market leader in pure software-defined video encoding, processing, and packaging into Ericsson. The combination will strengthen our encoding position with both custom silicon and pure software encoding, delivering performance and flexibility.

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So far in 2015, Envivio shares have outperformed the market and are up nearly 42% (compared to Wednesday’s close) year to date, however shares are down about 6% in the past 52 weeks.

Shares of Envivio closed Wednesday down 2.1%, at $1.90 in its 52-week trading range of $1.18 to $2.30. After the announcement, shares were up over 110% at $4.08 in early trading indications. The stock has a consensus analyst price target of $1.70.

Ericsson shares closed Wednesday down 0.6%, at $9.75 in its 52-week trading range of $9.42 to $13.28. The consensus price target is $12.85.