NEC Corporation (TYO:6701)
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May 1, 2026, 3:30 PM JST
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M&A Announcement

Oct 29, 2025

Asako Aoyama
Deputy CFO, NEC Corporation

Today we announce the acquisition of U.S.-based CSG Systems International Inc., a software company serving telecom and broadband service companies. This is the executive summary. The first one is, in the U.S. broadband industry, CSG Systems International is a very strong company not only in this area but also in the software and service offerings, and we did decide to acquire this company. We will be able to enjoy the synergy by complementing the customer bases and solutions of CSG and Netcracker, our U.S.-based NEC subsidiary. They have different geography as well as customer segments, so we will be able to provide the optimal service to the customers. Also, by leveraging their capability including DX, we will be able to cross-sell and expand our businesses.

I believe that there are numerous synergetic businesses that we can have, and also we can utilize NEC Group's technologies, customer base, and capital to drive further global growth of software services businesses from North America along with Europe. Focus digital government and digital finance businesses already explained in the presentation, and from the financial point of view, we can have the stable earnings of CSG, and therefore NEC's non-GAAP EPS can be increased by 7.7% even without the synergies, but with the synergies we will be able to aim at further upside impact. Now please look at the details of the summary. The company name is CSG, and in terms of acquisition, it's $80.7 per share, and the total of acquisition is $2.9 billion, which is about JPY 441.7 billion, and in terms of employed enterprise value, it is about $2.9 billion, which is about JPY 438.5 billion.

The premium is based on October 28 2025; the share price was $68.75, so we have a premium of 17.38%, and implied EV is at 10.3. In terms of financing, we will use cash on hand and have new borrowings. In terms of the structure, through the wholly owned subsidiary of NEC, through a reverse triangular merger with a merger sub will be the scheme, and the conditions are to get the approval from CSG shareholders meeting and obtain applicable regulatory approvals, and we believe that we will be able to close the deal within next calendar year. This is a CSG Systems overview. As you can see, it is the telecom broadband BSS (business support systems) of their business, and they provide this software, and it is a leading company, and it is securing stable revenue.

It was established in 1994, and in terms of the business content as mentioned before, they have BSS where business mainly for telecom BB service companies. They also have a customer experience or CX business. They also have payment software related businesses as well. On the right, you see the historical revenue and profit. The vertical is the sales revenue. In 2024, they were able to do $1,197 million, and they were able to increase that by 5%. CAGR and adjusted op was 18% last year. Adjusted EBITDA in FY 2024 was 23%. Let's move on. What is the strength of CSG? They have been in business for broadband as well as telecom, and through BSS offerings. They have a very strong portfolio of customers, and they will be able to help DX of the customers. Therefore, they can open the doors of different industries. Please look at the left.

This is for telecom BB. They have major U.S. telecom BB companies as their customers. On the array, you see the depth and width of their industry. They include financial, healthware, and logistics. They have expanding CX and payment software, and this segment is growing. This compares 2020 - 2024 in terms of what is the sales ratio by segment. The revenue was $991 million, and about 77% was telecom and BB customers and others. That is 23%. As you can see on the right, cover CX and payment software. Now, when you look at 2024, their revenue was $1.197 billion, and the absolute value of telecom and BB increased, but percentage is going down. On the other hand, others, meaning CX and payment software, is increasing.

Takayuki Morita
President and CEO, NEC Corporation

This is a significance of these acquisitions. This is to enhance a strong base in the telecom and broadband software and service market. It is also to expand through the broader customer base of CSG and Netcracker. As you can see in the blue letter as the highly complementary capabilities between the two companies, we can expect a very strong synergy potential. In case of CSG, it is headquartered in Englewood, Colorado, and then a pie chart shows the different sales and revenues for different regions. The Americas sales dominates about 90%. In case of Netcracker, it is situated in Waltham, Massachusetts, in Boston and also global and Asia. EMEA is quite prevalent in Netcracker business. Also at the bottom it says solutions in business support system is the good in CSG.

CSG provides CX and payment, and Netcracker not just BSS but also provide the operation support system, so to support systems for the operation of network. Next slide. This is a synergy from these acquisitions. Both companies, by obtaining these companies, we can make the large synergy effect including NEC those customer base technologies and customer base and DX capabilities to boost product competitiveness and expand into various industries. In the vertical axis shows the segments and the first one is telecom, broadband, and then financial services, healthcare, and logistics and transportation. On the far left, the first synergy is to enhance cross selling and multi industry capabilities and to be able to provide various types of businesses. Number two is to bolster solutions by utilizing both companies technology and DX capabilities. The third one is to improve operational efficiency.

This is the best synergy and that we can expect good synergies from this acquisition. Also in the NEC group's technologies, customer base, and capital can be fully utilized. We can drive global expansion of software and service from North America alongside digital government and digital finance business center in Europe. Digital government and digital finance business is led by NEC Software Solutions UK and Danish KMD. In this sector we can provide these solutions. From Switzerland, Avaloq, and this is the management company. In the software services business, these are provided by these three companies. In case of CSG, as I've explained, it is centered in North America and then with working with Netcracker is a very good affinity with Netcracker. As you can see in the bottom, NEC's technology with AI technology can be utilized and to be more than 40 countries being deployed.

Using the capital power, the DGDF business and combined with Netcracker and CSG, we can globally lead software and service business and to increase the value of the NEC Group. Next slide. Lastly, I'd like to explain financial impact by these acquisitions. Even if we include the amortizations, it would immediately impact EPS growth even after deducting amortization. It would also enable NEC to pursue cash ROIC exceeding WACC. On the left is a non-GAAP earnings per share. Let me explain. On the left, upon closing, immediate EPS growth is anticipated and to be able to achieving via the synergies, which a further upside could be achieved. At the left, NEC standalone is JPY 173 EPS. With this transaction, even without synergy, it would achieve JPY 186 of EPS, which is approximately 7.7% increase. Even with amortization of intangible assets, EPS is to increase by approximately 2.1% to further upside.

Also, the double-digit percentage improvement can be expected for sure. On the right-hand side, the cash ROIC for the acquisition. Within the five years of the acquisition, we can have the cash rate could surplus NEC's WACC via realization of synergies, 5.1% in FY 2025, and that was the NEC. WACC is between 6%- 7%. By achieving synergy within a few years, we can have a strong upside and further upside expected. With that, this was the U.S. CSG Systems International Inc. will be acquired. Thank you very much for listening.

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