Ericsson Hires Banks to Explore Sale of Media BusinessesBy
Morgan Stanley is helping find a buyer for media solutions
Goldman Sachs is managing sale of broadcast and media services
Ericsson AB, whose credit rating was cut to junk by Moody’s Investors Service last month, has hired banks to review its media businesses as the company refocuses on its main wireless network-equipment operations by selling assets, according to people with knowledge of the matter.
Ericsson is working with Morgan Stanley to explore a sale of its media solutions business, the people said, asking not to be identified because the deliberations are private. Separately, the Stockholm-based company hired Goldman Sachs Group Inc. to find a buyer for its broadcast and media services unit, the people said.
The businesses have attracted interest from private equity firms as well as technology and media companies, the people said. Sale plans are at an early stage, and Ericsson could decide to keep the assets, they said. Representatives for Ericsson, Morgan Stanley and Goldman Sachs declined to comment.
Ericsson Chief Executive Officer Borje Ekholm said in March that he was considering a sale of the media units, where growth has been crimped by a decline in legacy product lines that has outpaced the rising revenue contribution from new products, according to Bloomberg Intelligence. Ekholm has promised to get rid of more than $1 billion in unprofitable wireless service contracts, eliminate a management layer and halve the number of regional divisions to five.
Ericsson’s media units, which had trailing 12-month sales of 9.2 billion kronor ($1.05 billion), may fetch about $534 million in a possible sale, using Technicolor SA’s enterprise value-to-revenue multiple of about 0.5 as a comparison, according to Bloomberg Intelligence. Arris International Plc trades at 1 times its trailing 12-month sales, but has a better growth outlook, according to Bloomberg Intelligence’s John Butler and Yan Liberman.
In an additional sign the company is moving from words to action, Ericsson on Wednesday announced the sale of its small power modules business to Flex Ltd. for an undisclosed sum. As a result, more than 300 employees and consultants are expected to transfer from Ericsson to Flex Power, the Swedish company said. In March, Ericsson agreed to sell a stake in its Iconectiv business for $200 million.
The company’s media solutions operations makes products to deliver and record paid TV, platforms to broadcast video across different devices and services to provide advertising. Broadcast and media services helps content providers schedule shows, attract audiences, broadcast on mobile devices and add graphics. The unit includes Red Bee Media, which Ericsson bought in 2014.
Ericsson’s credit rating was cut to junk by Moody’s in May as the ratings company highlighted the long-term risks to innovation stemming from a strategy premised primarily on cost-cutting. The downgrade marked the first time since 2005 that Ericsson has been rated junk.