One of the few remaining staples of Ottawa’s technology cluster, March Networks, is to be acquired by a Infinova Canada Ltd., a subsidiary of a Chinese company seeking to gain a stronger foothold in the burgeoning video surveillance market.
Still subject to the approval of shareholders at March and Shenzhen Infinova Ltd., which has U.S. headquarters in Monmouth Junction, N.J., the $90 million deal would see the Canadian company continue to operate independently, maintain its name and brands, and deliver on all of its commitments to customers, while taking full advantage of Infinova’s manufacturing expertise and R&D scale, Infinova said in a statement.
In a conference call with financial analysts, March CEO Peter Strom said the offer came after the company announced in June that it was reviewing its strategic alternatives — a short form that usually means its looking for a buyer. Among the advantages Infinova offers, he said is that the merger will create one of the 10 largest global players in the video surveillance industry and it will give March better access to Asian markets.
He refused an analysts’ request for “colour” on how the deal came together, including how many other companies had a look at March’s books, until a circular goes out to shareholdes in February. Two-thirds of shareholders have to approve the deal.
The deal would mean publicly-traded March will be de-listed by the Toronto Stock Exchange. Combined with the time it will take for regulators in China and Canada to review the deal, Strom expects it will close in the fourth quarter of 2012.
The chairman and a founder of March Networks is Ottawa entrepreneur Terry Mathews, whose Wesley Clover Corp. investment arm has has a piece of the company for some time. In fact company directors hold 22 per cent of the shares.
In April, March Networks announced Command, a revamped version of its VideoSphere video management software (VMS). Designed to oversee up to 128,000 cameras, Command includes the ability to configure and patch large numbers of edge devices at a time, and to have the video replay, capture and tools an investigator needs. In addition, the Enterprise version can take advantage of what the company calls server to server gateway technology to reduce bandwidth across the wide area network, avoiding the expense of multicasting.
Infinova is buying a company that is still hurting from the global slowdown. March Networks was among the Canadian tech players hurt by the most recent recession, posting millions of dollars in losses as a result of the slump in global spending. In its most recent second quarter results, also announced Friday, it posted a quarterly loss of $2.3 million, versus year-ago earnings of $1.2 million.
During the conference call chief financial officer Ken Taylor blamed “quarterly volatility inherent in the company’s business.” While sales in Europe were down “significantly,” he and Strom said, North America sales are “tentative” and retail sales “flat.” That’s why March is abandoning its forecast of revenues being up 10 per cent in the current fiscal year over the 12 month period a year ago.
On the other hand, they pointed out that last month WalMart, one of its biggest customers, ordered $16 million worth of equipment. Most of that will be counted this quarter, which, Taylor said, will be a record one. As a result, he said, revenue for the first three quarters of fiscal 2012 will about equal the same as the nine-month period a year ago.
“We do believe there is still unlocked value, still growth there for the company,” Strom said, particularly as March rolls out software applications.