Sources: Suitors Are Circling Around Tech Firm SeaChange - Multichannel

Sources: Suitors Are Circling Around Tech Firm SeaChange

TIVO, ROVI SAID TO BE FLIRTING WITH VIDEO SOFTWARE PROVIDER
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SeaChange International has dropped weight through the recent sale of non-core assets, and it appears its slimmed-down, software-only look is attracting attention from possible suitors.

Both TiVo and Rovi have inquired about buying SeaChange as they seek out new growth angles in the U.S. and abroad, according to multiple industry sources.

“They’re definitely in play,” a source said of SeaChange, noting that buzz around those discussions has picked up within the last three weeks. However, it is not clear if any such deal is imminent.

But the deal speculation caused SeaChange shares to spike last week. The stock jumped 11.33% on Thursday (Oct. 3), to close at $12.97. Shares settled down by Friday afternoon, trading up 9 cents (0.69%) to $13.06 each. Noble Financial issued a research note Oct. 3 suggesting that SeaChange’s asset value would be $20 per share if a competitive bidding war were to develop.

SeaChange could make for an attractive, gap-filling, market-extending purchase for either TiVo, the maker of digital video recorders, video software and user interfaces, or Rovi, a top developer of interactive program guides and video-navigation systems.

Among the SeaChange assets said to be coveted are Adrenalin, its multiscreen video back-office platform; Nucleus, a software system for set-tops and gateways; and its arsenal of advanced-advertising products. SeaChange, thanks in part to its $12 million acquisition of VividLogic in 2010, has also developed a cloud-based navigation system called Nitro that extends a similar-looking interface across TVs, PCs, tablets and smartphones.

SeaChange has also developed a stack for the Reference Design Kit (RDK), the pre-integrated software platform that is now being managed by Comcast and Time Warner Cable, and has drawn interest from Liberty Global and other MSOs with operations in Europe.

SeaChange is no stranger to Rovi or TiVo. At The Cable Show in June, Rovi and SeaChange demonstrated an integrated guide and gateway built to the RDK spec based on the Rovi TotalGuide and SeaChange’s Nucleus Soft Box platform. TiVo and SeaChange have also worked together on back-office integrations that enable TiVo DVRs to work with the VOD systems of Comcast and other cable operators. They also share key customers, including Virgin Media, the U.K.-based MSO that is now part of Liberty Global.

SeaChange, Rovi and TiVo all declined to comment on the M&A speculation.

TiVo’s $1 billion cash stockpile has some analysts wondering if the company will seek a sizable, transformative acquisition. Chief financial officer Naveen Chopra declined to comment on the SeaChange speculation on Thursday at the Lazard Capital Markets Digital Media Day, but reiterated a message that TiVo would remain “cautious” about M&A opportunities.

SeaChange, meanwhile, is viewed as a more attractive acquisition candidate after it successfully shed its noncore assets. Last year, it sold U.K.-based video acquisition and aggregation service On Demand Group to Avail-TVN (now Vubiquity), and sold its broadcast-server and storage business to a private investment group.

TAKEAWAY

Slimmed-down video software vendor SeaChange is attracting attention from two well-known M&A suitors, DVR maker TiVo and guide provider Rovi.

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