(Bloomberg) -- Five years after selling a video-software business to Cisco Systems Inc. for $5 billion, private equity firm Permira has agreed to repurchase it back for a fifth of the price.
Permira is buying Cisco’s video software business -- formerly known as the NDS Group -- in a bid to create a new standalone company, according to a statement Tuesday.
The deal is expected to cost around $1 billion, according to a person close to the matter who asked not to be identified because the details are private. Bloomberg reported in October the NDS unit was up for sale.
Cisco Chief Executive Officer Chuck Robbins is shifting away from the expensive, fixed-purpose machines -- such as satellite boxes -- that once dominated the industry.
NDS’s products are used to send interactive content to television set-top boxes, digital-video recorders and mobile phones, and are part of Cisco’s service-provider video unit that has reported declining revenue since 2014. Traditional subscription-based TV services that previously relied on satellite boxes have faced increasing competition for viewers, due to streaming offerings from Netflix Inc. and Amazon.com Inc.
Cisco acquired NDS for about $5 billion in 2012 -- then its biggest acquisition in six years. At the time, the previous CEO John Chambers said he intended to make software a bigger focus for the company. In 2015 it sold its connected-device business, the former Scientific-Atlanta, for $601 million, a decade after buying it for $6.9 billion.
The new Permira-backed spin-off is set to be led by Abe Peled, the former CEO of NDS, according to the statement. The sale of the business has been approved by Cisco’s board of directors.
Bank of America Merrill Lynch is providing committed financing for the deal, and acted as financial adviser to Permira.
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