ARRIS snaps up BigBand for $172M in cash

The video-streaming service snapped up at a 76% premium

As demand for video streaming grows, more companies are rushing to buy up online video services and technology. ARRIS, a global communication technology group, is the latest to announce it is using its financial weight to pick up a streaming service -- BigBand Networks.

ARRIS announced Tuesday morning that it will purchase the video company for $172 million, or $2.24 a share, a 76% premium to BigBands' valuation at the time of the announcement. The price-tag, however,  includes the estimated $119 million in cash that BigBand has on hand.

Currently, BigBand, which trades under the symbol BBND, is up 74% in early trading. Arris Group (ARRS) fell slightly to $11.38. 

BigBand, which provides users an array of digital video networking options that help monetize and distribute content, has several products and patents focused on optimizing the use of bandwidth -- a service in high demand as the speed of video access becomes a larger factor in choosing servers.

When a service optimizes bandwidth, it allows the same amount of content to be viewed clearer and faster or allows more content to be provided at the same clarity or speed.

Other recent investments and bids of larger companies into video streaming services include Skype's bid for the mobile video company Qik and Tesco's move to grab a lion's share of the UK movie streaming site Blinkbox in April.

These larger companies see the potential in marketing better video services to their other media arms in a space where yound startups have put in all the time to build out the technology but don't normally have the money to compete on a global scale.

Online and mobile viewing of content, referred to as Over the Top (OTT), has opened opportunities for several internet extension companies such as Hulu, Netflix and YouTube but has been a source of contention with traditional cable providers that are concerned that consumers will start cutting their cable in favor of on-demand video consumption from anywhere a mobile device gets a WiFi signal.

A popular video streaming service, Hulu, is currently entertaining bids from communication and media bigwigs such as the Dish Network, Amazon and Google -- just as frontrunner Yahoo bows out.

BigBand already had a sizable presence globally, with 200 customers in North America, Asia and Europe, including eight of the ten largest cable service providers in the United States and Canada, according to the company.

ARRIS says the proposed deal will extend its capabilities in the processing, management and distribution of digital video content. Another important aspect of the decision to acquire BigBand was the latter’s patent portfolio, ARRIS says in a statement. 

ARRIS said that it anticipates it will eliminate a substantial number of public company costs and align the two companies sales, marketing, and R&D initiatives.  

"We are both enthusiastic and optimistic about the BigBand acquisition because it builds on our stated business strategy of growing our current businesses into a more complete portfolio including a strong video product suite and investing in the evolution towards network convergence onto an all IP platform," said Bob Stanzione, ARRIS chairman & CEO in a statement.  "In addition, the acquisition offers new opportunities to expand our customer base worldwide. We are delighted to welcome the BigBand employees to ARRIS."

The board of directors of BigBand has recommended that the shareholders of BigBand accept the tender offer. Redpoint Ventures and ValueAct Capital Partners, holders of 32 percent of the outstanding shares of BigBand, have agreed to tender their shares in the offer.

Completion of this acquisition is expected in a matter of weeks.