Devoncroft Podcast: Waiting for Closure… Belden, Grass Valley, and Black Dragon Capital

Joe Zaller | July 1, 2020

245 days have passed since Belden announced its intention to divest Grass Valley and 149 days have passed since the announcement of the sale of Grass Valley to Black Dragon Capital.

That’s a long time.

So, while hanging out in the office – at an appropriate social distance – and waiting for the deal to close (which the company had implied would happen by Tuesday June 30th), we got to talking about Grass Valley’s history under Belden, which started more than a decade ago with the acquisition of Telecast Fiber Systems and was followed by the purchase and integration of Miranda, Softel, Grass Valley, and SAM.

There was a lot to talk about, so this is a long one – not 245 days, but still long.

While we think it’s very interesting, if you don’t, this recording will probably feel like its 245 days long.

In aggregate, Belden spent about $700 million to acquire approximately $600 million of revenue (if you add up the sales of all acquisitions at the time of the transaction).

2018 company revenue came in at approximately $425 million. In 2019 revenues were about $356 million, thanks to even-odd year cyclicality and a structural decline in the playout market.

Belden announced on October 31, 2019 that it planned to sell Grass Valley (after a lengthy internal review process), and on February 4, 2020, the company said it had entered into a definitive agreement with Black Dragon Capital (headed by former Avid Chairman and CEO Louis Hernandez Jr.). Then Covid-19 happened and live events including virtually all sports and the Olympics were postponed or cancelled and Grass Valley’s sales in the pandemic-impacted first quarter of 2020 clocked in at approximately $51 million.

Through it all, executives from both Grass Valley and Black Dragon have remained bullish on the deal and – along with Belden – telegraphed that the sale would close before the end of the first half of 2020. This was two days ago (and counting) but we’re giving them the benefit of the doubt because all indications are that the transaction will be completed soon.

So, in anticipation of a near-term close of the deal (likely to coincide with the conclusion of the second quarter of Belden’s financial year), the Devoncroft team discusses several aspects of the transaction, including:

  • Josh admits that at the time Belden acquired Miranda, he was “deep deep into the M&A vibe of the industry” (but appears to have finally recovered)
  • A review of the structure of the transaction and what it says about investor interest in Grass Valley
  • The deal valuation, especially in the context of Grass Valley’s recent financial performance
  • Background on the $700m+ of capital deployed by Belden in acquiring the precedent businesses of the current Grass Valley
  • What went right and what went wrong
  • The importance of thorough, fact-based diligence when considering investment opportunities
  • How the Grass Valley transaction is representative of the prevailing view of the media technology sector by private equity firms
  • What is next for Grass Valley under Black Dragon’s ownership

Both members of the Devoncroft team present on the podcast bear equal responsibility for the duration of the 80-minute discussion (but it’s mostly Josh’s fault).  There is a lot to unpack with the deal.  To spare listeners from a resuscitation of figures, we purposely recorded the discussion without notes.

You can listen to the podcast using this link.


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