Macrovision To Acquire Gemstar-TV Guide For $2.8 Billion
Deal Would Combine DRM Technology With TV Guidance Products
By Todd Spangler -- Multichannel News, 12/7/2007 1:25:00 AM
Macrovision, a maker of digital-rights management products, will buy Gemstar-TV Guide International – a leading provider of TV listings and on-screen guide technologies – in a cash-and-stock deal worth $2.8 billion.
Shares in both companies sank after the deal was announced Friday. Macrovision’s stock opened down 20%, at $20.76, compared with the $25.99 previous close. Gemstar TV-Guide shares opened at $5.31, down 11% versus Thurday's $5.98 closing price.
When Gemstar-TV Guide put itself up for sale in July, analysts valued the company at around $3 billion.
Macrovision, whose customers include major Hollywood studios, video-game producers, software companies and PC and digital set-top box manufacturers, said merging its DRM portfolio with Gemstar-TV Guide’s TV guidance products will let consumers access a wide variety of content on numerous devices through simple guides.
Gemstar-TV Guide generates more than twice the revenue of Macrovision. Based in Santa Clara, Calif., Macrovision posted $247.6 million in revenue and $33.0 million in net profit in 2006, while Los Angeles-based Gemstar-TV Guide reported $571.3 million in revenue and $72.5 million net profit last year. Gemstar-TV Guide last reported 1,691 employees, while Macrovision had 784.
“We are now in a position to accelerate our vision by providing an enhanced combination of capabilities in support of the entire value chain, which is designed to deliver a differentiated solution for consumers,” Macrovision president and CEO Fred Amoroso said in a statement.
“We believe that the combined entity, with its complementary technologies, customers and global presence has the potential to redefine the consumer entertainment experience and drive significant additional stockholder value,” Gemstar-TV Guide CEO Rich Battista said in announcing the deal.
News Corp., which owns approximately 41% of Gemstar-TV Guide common stock, has agreed to vote in favor of the deal. Gemstar-TV Guide’s board also unanimously approved the transaction.
According to Bank of America equity research analyst Jonathan Jacoby, News Corp.'s 140 million shares of Gemstar-TV Guide are worth an estimated $1.1 billion under the proposed deal. In 2002, News Corp. took $6.1 billion in write-downs on its Gemstar investment.
The companies said once the deal closes, Battista and Gemstar-TV Guide CFO Bedi Singh will be leaving the organization. Amoroso will be the combined company’s president and CEO, while Macrovision CFO James Budge will serve as its CFO. The new board of directors will comprise four members to be designated by Macrovision, and three tapped by Gemstar-TV Guide.
Macrovision said it plans to raise $800 million in new debt to help finance the deal, according to a regulatory filing. The companies currently expect the deal expected to close by early second quarter 2008, subject to usual closing conditions
Under the terms of the agreement, Gemstar-TV Guide shareholders -- subject to proration -- can choose to convert each of their shares into $6.35 in cash or 0.2548 of a share of common stock in a new holding company that will own both Gemstar-TV Guide and Macrovision. The offer represents a 29% premium to the 10-day average closing price of Gemstar TV Guide’s common stock (prior to announcing in July its intention to sell itself).
The deal requires approval by Gemstar-TV Guide shareholders representing two-thirds of the outstanding shares, as well as shareholders who own of a majority of Macrovision shares.
JPMorgan served as financial advisor to Macrovision. UBS Investment Bank was financial advisor to Gemstar-TV Guide.
