Demonstrating just how the lines have blurred for video delivery and data services, Time Warner Cable announced a $230 million deal to acquire NaviSite. What’s that? NaviSite is a provider of enterprise-class hosting, managed application, messaging and cloud services – major growth areas for business-related technology.
NaviSite is a publicly traded Nasdaq company. The buyout offer of $5.50 per share is a 33% premium to the Tuesday (2/1) closing price. To no one’s surprise, several class action law firms immediately began trolling for potential clients to see if there might be a reason to sue. The stock price had been much, much higher years ago – but not recently.
“Our commercial services business is a key growth driver for the company and one in which we continue to see great opportunity,” said Glenn Britt, Chairman and CEO of Time Warner Cable. “NaviSite provides us with a successful managed services business and a new, innovative managed cloud platform representing significant new growth opportunities. We expect to build upon NaviSite’s successful enterprise-class offerings, and their operational capabilities, infrastructure and expertise to more rapidly create a robust managed services offering for small and medium sized businesses. This transaction is consistent with our capital allocation strategy – selectively investing in our business to accelerate growth while continuing to return capital to shareholders.”
The acquisition provides Time Warner Cable Business Class, Time Warner Cable’s commercial services business, an immediate presence in the managed services market with NaviSite’s more than 1,200 customers. Following the completion of the acquisition, Time Warner Cable plans to continue the exceptional service of NaviSite’s Enterprise customers and to use NaviSite’s operational expertise and enterprise-class infrastructure to meet the rapidly growing demand for managed services offerings from Time Warner Cable’s existing and future small and medium-sized business customers.
Wells Fargo Securities analyst Marci Ryvicker applauded the acquisition. In a note to clients, she said it should be immediately accretive to both earnings per share and free cash flow. Ryvicker estimates that Time Warner Cable will be able to cut general and administrative costs at NaviSite by about $10 million per year. She also notes that it is a small deal for a company the size of Time Warner Cable, but one which will help boost its small and medium enterprise business, “which is currently the fastest growing segment in cable.”