RRsat Global Communications Network Ltd., leading provider of comprehensive digital content management and global content distribution services to the television and radio broadcasting industry, today announced the acquisition of JCA, a London-based provider of content management services. This acquisition is fully aligned with RRsat’s growth strategy of becoming a global company with local presence in key locations. The acquisition is expected to be accretive to RRsat’s earnings within the first full operational quarter post acquisition.
“This acquisition and the formation of RRsat Europe Ltd. are important milestones in the implementation of our strategy to become a global company with local presence, closer to our clients,” commented Avi Cohen, RRsat CEO. “There are two major aspects to our business: content management and content distribution. While the content distribution aspect involves our state-of-the-art facilities in the U.S. and Israel, content preparation and management requires a local presence working closely with our customers. The addition of JCA’s sophisticated local operation in London will enable RRsat to leverage local talent and provide services specifically for content preparation and content management to customers in Europe. This is an important asset that will expand our scope of services and we are confident that it will enhance our leadership position in the market.”
“The effort to expand our local presence in key markets began with the acquisition of SM2 in 2012. This gave us an expanded local presence in the United States, content management and distribution of lucrative sports events, as well as access to top-tier North American customers,” added Mr. Cohen. “During 2013, we opened an office in Moscow, augmenting our access to customers in Russia and the Commonwealth of Independent States. Today, we are establishing a strong foothold in Europe, specifically in London, one of the world’s largest centers for media and broadcasting. The continued execution of this strategy will allow RRsat to expand further, effectively leveraging our global distribution infrastructure.”
Strategic benefits of the JCA acquisition include:
- A solid business with impressive track record of growth, exceeding 400% since JCA was acquired by TVP Group in 2004 reaching revenue of just under $10 million (non-GAAP) during the last year as well as gross margins and profit margins that are consistently higher than RRsat’s.
- A talented management team, with over 30 years of industry experience, which strengthens RRsat’s senior management team. JCA’s Managing Directors, Simon Kay and Nick Pannaman, will remain with the organization as Managing Directors of RRsat Europe Ltd., and will join RRsat’s executive management team, reporting directly to RRsat’s CEO.
- A presence in London, a key strategic market and one of the premier broadcasting centers in the world, providing access to customers in continental Europe.
- A top-tier customer base, including BBC Worldwide, Sony DADC, Shine International, Channel 4, Classic Media, DRG, Film4 as well as access to additional higher tier local broadcasting customers in the U.K. and Europe.
- A broadening of RRsat’s content management capabilities, including expanded content preparation capabilities such as film restoration, ingest and transcoding, content re-versioning, digital platform distribution and its bespoke Media Window providing clients with their own on-line platform.
RRsat is acquiring 100% of TVP Group of which JCA is a wholly owned subsidiary. In consideration for the acquisition, RRsat will pay $9 million in net cash. An additional payment of $4.5 million will be deferred, conditional on business results including revenue growth and profitability in the three years following the acquisition. Management expects the acquisition to be accretive during the fourth quarter this year.
“Once we complete the integration of JCA, we plan to increase its core service and expand its global customer base and services,” added Mr. Cohen. “Our existing client base will benefit from additional sophisticated content preparation services. We plan to take advantage of the experienced local management team and their access to top tier clients in the U.K and Western Europe and offer RRsat’s complete set of content management and global distribution services. Financially, we expect this acquisition to improve our overall profitability.”
RRsat management expects to fund this acquisition using cash on hand and through expected operating cash flow of the acquired entity. (Source: RRsat press release)