Rovi to Acquire TiVo for $1.1B

Combined company to be led by Tom Carson, adopt TiVo brand
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Rovi announced Friday that it has agreed to acquire TiVo for $10.70 per share in cash and stock for total consideration of about $1.1 billion.

Broken down further, Rovi will pay $2.75 per share in cash, or $277 million, with the remaining $7.95 per share to be paid in shares of common stock of a new holding company that will own both Rovi and TiVo. They said the offer represents a premium of 40% over TiVo’s closing price of $7.66 on March 23, 2016, the last trading day prior to rumors about a possible deal.

They said the combined company will will be led by current Rovi CEO Tom Carson, and that it will adopt the TiVo brand as the new company name. They anticipate that the deal will result in $100 million in annual cost synergies (with 65% of them to be recognized in the first 12 months), and that they will be accretive to Rovi’s non-GAAP earnings per share within the first 12 months. On a pro forma basis for the 12 months ended Dec. 31, 2016, the combined company is estimated to have more than $800 million in revenue, after purchase accounting adjustments, they said. They said the combined company will have a combined enterprise value of $3 billion. 

The deal is expected to close in Q3 2016. Post-deal, current Rovi stockholders will own between 66.8% and 72.9% of the pro forma shares outstanding in the new holding company. 

The deal combines two companies with extensive patent portfolios and interactive guide products and, in TiVo, a DVR pioneer that builds devices for sale at retail and in partnership with a growing mix of MVPD partners that include Virgin Media, Com Hem, Suddenlink Communications, Mediacom Communications, and RCN, among others. TiVo recently announced that it had eclipsed 7 million subscribers worldwide, with the most coming way of deals with MVPDs. 

The combined company, they said, will serve nearly 500 service providers worldwide, adding more than 10 million TiVo-served homes to Rovi’s current base of about 18 million that use Rovi guides today. 

Continuing its focus on platforms that combine traditional TV and OTT services, TiVo’s latest major product entry is the 4K-capable Bolt, which introduced a new controversial feature called SkipMode that lets users jump past commercial breaks in recorded shows. Earlier this week, it announced a new version of the Roamio OTA, a device tailored for cord-cutters, that combines a larger 1-terabyte hard drive along with new pricing that doesn’t require the users to pay a monthly service fee.

Rovi and TiVo estimate that the combined intellectual property portfolios of the combined company include more than 6,000 issued and pending patents. 

And both companies have used them to litigate others . Among recent court activity, TiVo has fired a lawsuit at Samsung claiming that the CE giant was infringing on four patents that have been litigated previously. That followed a string of settled lawsuits with Motorola Mobility (formerly part of Google) and Cisco Systems, as well as Time Warner Cable, Dish Network, AT&T and Verizon Communications. Also of recent note, Rovi filed a patent suit against Comcast alleging that the MSO, together with its set-top suppliers, are infringing on 14 of Rovi’s U.S. patents that deliver features such as remote recording, its AnyRoom DVR (multi-room) capabilities and search for its X1 platform.

They estimate that the combined companies have generated more than $3 billion in combined IP licensing revenues and past damage awards. 

Evercore is serving as financial advisor to Rovi and Cooley LLP is serving as legal counsel. LionTree Advisors is serving as financial advisor to TiVo and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel.

“Rovi’s acquisition of TiVo, with its innovative products, talented team, and substantial intellectual property portfolio, strengthens Rovi’s position as a global leader in media discovery, metadata, analytics, and IP licensing,” Carson said in a statement. It’s an exciting time as the media and entertainment landscape undergoes a significant evolution. The combined capabilities of TiVo and Rovi place us in a tremendous position to extend services across platforms and to a customer base that includes traditional, over-the-top and emerging players across the globe. By working together, Rovi and TiVo will revolutionize how consumers experience media and entertainment and at the same time build value for our stockholders.”

“We’re proud of TiVo’s strong innovation history and of the ongoing efforts of our team to provide best-in-class products for our loyal consumer and service provider customers,” added Naveen Chopra, TiVo’s interim CEO and chief financial officer. “This transaction is the culmination of those efforts and the logical next step for TiVo. In joining forces with Rovi, our customers, employees and stockholders will benefit from being part of a more diversified industry leader with significantly greater market opportunities. Our combination creates a more influential global player with a commitment to product innovation, which will be incredibly well positioned to redefine television.”