French media and entertainment technology group Technicolor will buy Cisco Systems' (NASDAQ: CSCO) home video equipment business for 550 million euros ($602 million U.S.), it said on Thursday.
The cash-and-stock deal is part of Technicolor's efforts to expand in the thriving home video market and boost profitability.
It will create the world's number-two player in customer premises equipment (CPE) - phone gear, cable and satellite TV set-top boxes, routers and switches - with total sales of three billion euros ($3.3 billion U.S.) and a 15% market share.
That compares with 25% that will be held by U.S. network gear maker Arris Group and British set-box maker Pace when they complete a merger.
The transaction will also boost Technicolor's footprint in North America, the biggest CPE market in the world. The combined company will make 57% of its sales in North America.
It will double annual revenue at its Connected Home division, give it 290 million set-top boxes installed in over 100 countries, and generate annual savings of over 100 million euros from 2018, the company said.
The transaction is expected to close by the end of the fourth quarter of 2015 or in the first quarter of 2016.
Cisco shares leaped 36 cents, or 1.3%, to $27.89 U.S., within a 52-week trading range of $22.49 to $30.31 U.S.
