Kudelski Group on Thursday said it would withdraw its proposal to acquire the portion of TV middleware and advanced-advertising company OpenTV it doesn't own.
OpenTV on Tuesday night said an independent committee appointed by its board had rejected Kudelski's bid of $1.35 per share for the remaining shares - an offer worth about $127 million - as "inadequate." Kudelski currently holds a 26.7% economic stake and 74.7% of the voting rights to OpenTV.
"Based on Kudelski's discussions with [OpenTV's] Special Committee, Kudelski has concluded that continued discussions will not be fruitful and has therefore decided to withdraw its proposal and terminate discussions with the Special Committee," it said in a statement.
According to Kudelski, "several key customers and major shareholders" of OpenTV had supported the "full integration" of OpenTV and Kudelski's Nagravision, a supplier of conditional-access systems.
Kudelski said it was committed to remaining OpenTV's controlling shareholder and reiterated its position that OpenTV "faces serious strategic challenges" if it doesn't adapt to meet market demands for integrated, next-generation set-top box technologies.
Kudelski said its concerns about OpenTV have "been met repeatedly with reluctance" and that it "intends to advocate through its board representation that OpenTV substantially increase its investment in next-generation solutions, mainly organically but also potentially through acquisitions... While this strategy is likely to depress OpenTV's financial performance over the next few years, such efforts and investments are required to insure OpenTV's long-term success."
The company continued, "Without such investments, Kudelski believes that the long-term viability of OpenTV's business as a standalone entity is seriously in doubt."
OpenTV's platform software has been deployed in more than 127 million digital set-top-boxes and TVs worldwide. The company's competitors include NDS, Cisco Systems and Microsoft. As of Dec. 31, OpenTV had 521 employees.
Kudelski also commented on an April 2 filing by one of OpenTV's investors, Chicago-based Discovery Group LLC, which owns 12.3 million shares of the company.
Discovery said Kudelski's offer "fails to recognize the inherent value of the Company and seeks to take unfair advantage of an artificially low share price" and said OpenTV's fair value would be worth $2.00 to $2.50 per share.
When Kudelski offered $1.35 per share for OpenTV in February the stock was at $1.00 per share. Since then OpenTV has gained value, closing Wednesday at $1.72 per share.
In response, Kudelski said Thursday it "urges shareholders to disregard Discovery Group's analysis and conclusions."
"Under no circumstances would Kudelski offer the prices suggested by Discovery, having determined such prices to be significantly in excess of Kudelski's view of the fair value of OpenTV," Kudelski said.
The Kudelski Group, based in Cheseaux-sur-Lausanne, Switzerland, is a holding company that owns or has interests in companies that provide a range of digital security and converged media technologies. Kudelski also sells high-end audio products and claims to be a world leader in technologies that manage access to sites and events.
In October 2006, John Malone's Liberty Group sold control of OpenTV to Kudelski for about $132 million.