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NeuLion [TSE:NLN], a provider of live and on-demand digital video solutions, is looking to expand its business in Japan through an acquisition, said President and CEO Roy Reichbach.
Plainview, New York-based NeuLion has a small office in Japan for its consumer electronics (CE) licensing business, which serves major CE companies such as Sony [TYO:6758] and Panasonic [TYO:6752] that embed NeuLion’s software in their hardware. Now, the company is looking to launch its digital video platform business in the country through an acquisition of a local target in the space as it did in Europe, Reichbach told Mergermarket on the sidelines of the Cantech Investment Conference 2017.
As there is an abundance of sports content available in Japan, including unique sports such as Japanese sumo wrestling, NeuLion recognizes opportunities to market its digital video streaming platform in the nation. The company is targeting sports property owners and operators and sports content rights holders as prospective customers, according to Reichbach, who said he is planning a trip to Japan in a couple of months to speak with potential clients.
NeuLion would also consider acquisitions in Latin America to establish an operational footprint there, the CEO noted.
Last June, NeuLion bought UK-based Saffron Digital, a developer of multi-platform digital video services for entertainment delivered over-the-top (OTT) to Internet connected devices. The all cash transaction was valued at USD 9m.
Reichbach said the acquisition enabled NeuLion to launch a platform operation center with a control room to handle live sports games and helped expand its four-person sales and support team to a 60-person operation.
While NeuLion previously carried out a larger acquisition, paying USD 62.5m for California-based DivX Corporation in January 2015, it prefers to buy smaller companies with its cash holdings, according to Reichbach. NeuLion had USD 69.6m in cash and cash equivalents as of 30 September 2016.
However, NeuLion could conduct a large-scale acquisition coinciding with a capital raise prior to uplisting to the NASDAQ exchange, Reichbach said. The company would require at least six months before beginning to prepare for the move, as it needs to grow revenue first, he mentioned.
NeuLion’s video streaming platform enables digital video broadcasting, distribution and monetization of live and on-demand sports and entertainment content up to 4K Ultra HD to connected devices. The company’s clients include professional sports leagues such as the NBA, NFL, NHL and UFC, as well as content providers such as Rogers Communications [TSE:RCI.A], Univision Communications and Sky UK.
Reichbach identified BAMTech as NeuLion’s main competition as well as its potential and current clients’ internal IT department. BAMTech is a subsidiary of Major League Baseball’s digital business, MLB Advanced Media (MLBAM). In August 2016, The Walt Disney Company [NYSE:DIS] announced it would buy a 33% stake in BAMTech for USD 1bn.
NeuLion generated CAD 32m (USD 24m) in revenue and posted a CAD 3.5m (USD 2.7m) net loss for the quarter ended 30 September 2016. During the same quarter a year prior the company recorded revenue of CAD 29m (USD 22m) and a net loss of CAD 4.1m (USD 3.1m). Its market capitalization is CAD 321m (USD 245m).