Cisco to Buy NDS, a Video Services Firm, for $5 Billion

6:43 p.m. | Updated Cisco Systems said on Thursday that it planned to buy the NDS Group, a provider of content streaming and security software, for about $5 billion to help expand its next-generation video services.

By buying NDS, which has British Sky Broadcasting and DirecTV among its customers, Cisco is hoping to augment its Videoscape streaming platform. The company has been focusing on its video offerings as it works to bolster lagging growth in its core networks business.

NDS, which is owned by the private equity firm Permira and the media giant News Corporation, focuses on providing systems that let companies stream content to a variety of devices. Among its biggest attractions is its content protection, which is important to media companies.

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The transaction represents a sizable return for Permira, one of Europe’s largest private equity firms. It bought NDS with News Corporation in 2009 for $3.6 billion. Since then, the software company has sold off noncore businesses and expanded into fast-growing markets like China and India.

Permira is expected to make roughly $2 billion on the sale, based on calculations from regulatory filings by NDS. That would more than double the private equity firm’s initial $900 million investment three years ago.

The sale to Cisco also represents a shift in strategy. Late last year, NDS announced plans to list on the New York Stock Exchange through an initial public offering, which was expected to raise up to $100 million. Yet despite renewed optimism in the United States financial markets, Permira and News Corporation have decided to sell the company to an industry buyer.

The deal is Cisco’s biggest since the company acquired Tandberg, another video company, for about $3 billion in 2009.

“Our strategy has always been driven by customer need and on capturing market transitions,” John T. Chambers, Cisco’s chief executive, said in a statement. “Our acquisition of NDS fits squarely into this strategy, enabling content and service providers to deliver new video solutions that leverage the cloud and drive new monetization opportunities and service differentiation.”

NDS, based in Staines, England, has about 5,000 employees and has operations in five countries. Its chairman, Abe Peled, will become a senior vice president and chief strategist for Cisco’s video and collaboration group.

Cisco was advised by JPMorgan Chase and Centerview Partners and the law firm Fenwick & West, while NDS was advised by the law firm Skadden, Arps, Slate, Meagher & Flom.