Infinova to acquire March Networks for $88.2 million

New entity will have ‘one of the largest R&D departments’ in the video surveillance industry
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Friday, December 9, 2011

MONMOUTH JUNCTION, N.J., and OTTAWA—In a deal designed to speed March Networks' entry into the Asian market and create one of the ten largest global players in the video surveillance industry, Infinova announced Dec. 9 that it will acquire March Networks in a cash deal worth $88.2 million (C$90 million).

Infinova will pay $4.90 per share (C$5.00). March Networks will continue to operate independently from its headquarters in Ottawa, and will retain its name and other brands.

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“We expect both companies to continue to go to market separately, so the sales staff, service, technical support—anything customer-facing, will remain as it is,” Stephan Cannellos, Infinova VP strategic business development told Security Systems News.

“March Networks will become a much larger enterprise than it was before—combined we’ll be about a $175 to $185 million organization,” Peter Strom, CEO of March Networks, told SSN.

March Networks currently has about “100 people in R&D and Infinova has 500. Combined we’ll have one of the largest R&D departments in the industry,” he added.

Strom said that Infinova will offer March a complete camera line, “both on the analog and IP side,” while March brings its VMS enterprise software and DVRs to its new owner.

The acquisition also will allow March Networks to move some of its manufacturing from Mexico to China. Strom said there are no immediate plans, but in light of March’s desire to expand into the Asian market and the “great pent-up demand in the banking [vertical] in the China market,” this move may make a lot of sense in the future. Banking and retail are March Networks’ major vertical market targets.

What about the challenges of bringing these two divergent companies together? “The key is not to try to do anything too quickly. Infinova didn’t go into this deal anticipating a lot of change or shifting of resources into the China market. In fact it is exactly the opposite,” Strom said.

The first step will be to evaluate the companies’ product lines to decide where it makes sense to bring Infinova’s products to March Networks and vice versa. The second step will be deciding “whether it makes sense” to move some of March’s production to Infinova’s facilities, he said. Next, the two companies have a lot of dealers in common, so “we want to make sure to coordinate channel activities so we’re not crossing paths.”

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“I think the opportunity is to take our large engineering and R&D group and determine how to bring key technologies and key products to the market in a faster fashion. That’s is our objective and our challenge,” Cannellos said.

March’s board of directors decided about six months ago to look at strategic alternatives. Strom said that the deal came about because he was talking to Infinova about a partnership as March expanded into the Asian market. Once the board made the decision to consider a sale, Infinova expressed an interest in buying the company.

Infinova, which has its U.S. headquarters in Monmouth Junction, N.J., went public in December 2010 on the Shenzhen exchange and raised $300 million.

March Networks raised $45 million when it went public in June 2005.

On Dec. 9, March Networks also announced its quarterly financial results. “For the second quarter, the company reported a loss of C$2.3 million, or 13 Canadian cents per share, compared with earnings of C$1.2 million, or 7 Canadian cents per share, a year ago," according to Reuters. Strom told Reuters: “We believe our results will improve in the second half of fiscal 2012 based on improved revenue visibility, including the impact of $16 million in orders from a large retail customer that we announced on November 8 , 2011." March Networks shares closed at C$4.89 on Dec. 9.

The deal with Infinova is subject to shareholder and regulatory approval.