Motorola To Acquire Broadbus

Motorola (NYSE: MOT) is close to acquiring television-on-demand company Broadbus Inc. for approximately $186 million in cash, PE Week has learned. The deal could kick off a flurry of related M&A activity, and should produce sizable returns for Broadbus investors like Battery Ventures, Charles River Ventures, Comcast Interactive, Star Ventures and Wolf Ventures.

Broadbus is a major player in the television-on-demand market, largely thanks to a RAM-heavy server architecture that is particularly facile for short-form programming. A joint venture with Tandberg Television also has helped Broadbus deploy with major cable providers, like Adelphia, Charter Communications, Comcast, Rogers Cable and Time Warner Cable.

Motorola’s interest is derived from a gaping hole in its existing video offerings, and a possible belief that it can further Broadbus’ penetration into the telecom market. Motorola also pulled the switch at a good time. Broadbus had been viewed as an IPO candidate for late 2007 or early 2008, but likely got scared off by recent trading troubles at listed competitors like SeaChange International (Nasdaq: SEAC) and Concurrent Computer Corp. (Nasdaq: CCUR). SeaChange shares, for example, are off over 30% since March while Concurrent opened today at just $1.74 per share.

;Motorola has been making some defensive moves against Cisco, but I think this flips the tables a bit,” says a source familiar with the pending sale.

Cisco – along with Intel – actually tried to invest in some of Broadbus’ early venture capital deals, but was turned down. It is unclear if Cisco made a serious play for Broadbus this time around, but now has targeted Arroyo Video Solutions as an alternative. The price should be cheaprer, and Pleasanton, Calif.-based Arroyo is closer to Cisco headquarters than is Boxborough, Mass.-based Broadbus.

Broadbus has raised $57 million in VC funding since its 1999 inception, including a Series A-1 infusion in 2002 at a pre-money valuation of less than $7 million. Battery Ventures and CRV led that round, with each firm’s deal lead – Todd Dagres and Santo Politi, respectively – having since left to form a new firm focused on the convergence of media, entertainment and technology.

A Motorola spokesman declined to confirm or deny the deal, saying only that PE Week is “chasing down a rumor until [Motorola makes] a formal announcement.” Broadbus executives were unavailable for comment.

Additional information and analysis of this deal will be available in the Monday edition of PE Week Wire. To get PE Week Wire in your inbox each morning, sign up here.