The decision to divest is being pursued after gaining approval from its board of directors. Grass Valley’s financial results will be presented as discontinued operations in the fourth quarter and full year 2019 financial statements and prior periods will be recast for consistency.
The divestiture of Grass Valley provides an opportunity for a broad-based organisational recalibration, henceforth, the launch of a cost-reduction program that is designed to improve performance and enhance margins. The new program aims to deliver a $40 million annualised reduction in selling, general, and administrative expenses. These initiatives will take effect immediately, with some benefit in 2020, and the full benefit in 2021.
John Stroup, president/CEO as well as chairman of Belden Inc,said: “Belden has a long track record of substantial growth, margin expansion, and shareholder value creation, but we are not satisfied with our recent performance.
“We are reaffirming our commitment to our stated financial goals, including a total revenue CAGR of 5%-7% and EBITDA margins of 20%-22%.
“The company will be well-positioned to achieve these goals after executing these actions. Importantly, the expected cost savings will more than offset the free cashflow dilution associated with the divestiture of Grass Valley.”
Stroup added: “We completed a rigorous strategic review of our portfolio of businesses, and today’s announcement marks an important outcome.
“We concluded that it is in the best interests of our shareholders, customers, and employees to separate Grass Valley from Belden. This will enable Grass Valley to more effectively execute its strategic plan and pursue growth opportunities.”