Private equity firm One Equity Partners has partnered with Ericsson on its Media Solutions business and One Equity Partners will become the majority shareholder. Ericsson will retain 49% of the shares in the company. Ericsson remains the owner of Red Bee Media and will continue to develop it as an independent and focused media services business. The terms of the transaction are confidential.
The news comes after Ericsson concluded the review of strategic opportunities for its media business which was initiated in conjunction with the announcement of the company's focused business strategy on March 28, 2017. In the review, Ericsson evaluated different opportunities for both units, including partnerships, divestments, and a continued in-house development, based on what generates the best long-term value for Ericsson.
"Media Solutions and Red Bee Media are leading providers of media products and services, and with the performance improvements that are currently being implemented, we see future upsides to both businesses," said Ericsson president and CEO Börje Ekholm. "We are confident that the direction we announce today will enable us to create the best long-term value, for both our customers and our shareholders."
Ericsson and One Equity Partners will form an independent company and will develop the business in line with its new business plan. The performance improvement initiatives initiated in 2017 will continue, Ericsson said, and are showing "tangible results".
Media Solutions employees and contractors, as well as specified assets and liabilities, will transfer to the new company upon closing. Ericsson and OEP said they are committed to a seamless transition for employees, customers, partners and suppliers. "The divestment will not result in significant restructuring charges," Ericsson confirmed.
Closing of the transaction is expected in Q3 2018 and is subject to customary closing conditions, including regulatory approvals. After the transaction is closed, Ericsson's share of the business will continue to be reported in segment 'Other'.
Ericsson said during 2017 it ran a performance improvement program for Red Bee Media (former Broadcast and Media Services), and noted that significant progress has been made, both in operational efficiency and cost savings. Ericsson will continue to develop it as an independent and focused media services business, with the execution of the performance improvement and legal separation activities, initiated in 2017, as "top priorities".
Full Year 2017 adjusted operating income for Red Bee Media was SEK -0.3 b. Full year revenues were SEK 2.5 b. Though still negative, the Q4 2017 adjusted operating income for the Red Bee business was improved year-on-year, driven by cost and efficiency improvements.