posted
AP Macrovision to Buy Gemstar-TV Guide Friday December 7, 11:43 am ET Gemstar-TV Guide Agrees to $2.8 Billion Cash and Stock Takeover by Macrovision; CEO to Depart
SANTA CLARA, Calif. (AP) -- Shares of Macrovision and Gemstar plunged Friday as investors soured quickly on a deal that would have the media technology company buyout the television listings business for $2.8 billion in cash and stock.
Macrovision Corp. wants to allow consumers to call up information about TV shows, view personal photos or access music libraries on a variety of electronic devices through a combination of its security software and Gemstar-TV Guide International Inc. programming data. Macrovision develops technology to prevent unauthorized copying and viewing of video, music and other content.
"There is a transformation of home entertainment going on and we want to give consumers the ability to find information quickly and easily across a variety of devices," Macrovision CEO Fred Amoroso said.
Wall Street apparently did not like the matchup, sending Macrovision shares falling nearly 22 percent, or $5.46, to $20.35 by midmorning. Gemstar shares did not fare much better, falling more than 16 percent, or 99 cents, to $4.99.
Amoroso not disclose plans for Gemstar-TV Guide's print operations, saying he would need time to understand that business before making decisions. "I don't have a deep background in that area," he said.
The company's flagship magazine has struggled with falling circulation and advertising revenue as viewers increasingly access programming data through their TV sets or online.
Gemstar-TV Guide shareholders will receive $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 cash component of the deal won't exceed $1.55 billion.
The $6.35 per share value represents a premium of 6.2 percent to the Gemstar closing price Thursday, and is 25 percent above Gemstar's closing price before it announced a strategic alternatives review July 9.
In a filing with the Securities and Exchange Commission, Macrovision said it will raise $800 million of new debt to finance the acquisition, and said JP Morgan and Merrill Lynch have agreed to commit funds.
The board of the Los Angeles-based television media company has unanimously approved the transaction, which is expected to close by early second quarter 2008. Rupert Murdoch's News Corp., which owns about 41 percent of Gemstar-TV Guide, has agreed to vote in favor of the deal.
Macrovision stockholders will continue to own one share in the new company for each share held at closing. When the deal is completed, Macrovision shareholders will own about 53 percent of the combined company, and former Gemstar-TV Guide stockholders will own 47 percent.
Macrovision shares fell $6.29, more than 24 percent, to $19.70. Gemstar fell more than 25 percent, or $1.52, to $4.46.
Amoroso will continue as president and chief executive of the new company. Macrovision's Chief Financial Officer James Budge will serve as CFO. The new board will include four directors designated by Macrovision, and three chosen by Gemstar-TV Guide.
Gemstar-TV Guide CEO Rich Battista and CFO Bedi Singh will leave when the deal closes.
JPMorgan served as financial adviser to Macrovision and UBS Investment Bank as financial adviser to Gemstar-TV Guide International.
Santa Clara, Calif.-based Macrovision has about 760 employees and reported revenue of $248 million for fiscal 2006. Gemstar-TV Guide, with about 1,600 workers, posted 2006 revenue of $571 million.
GemStar and TV Guide Inc. combined in 2000 for about $14.2 billion. The company restated millions in revenue after its former CEO Henry Yuen was found guilty in 2006 of securities fraud for inflating revenue between 2000 and 2002. News Corp. took a $11.1 billion writedown for its Gemstar-TV Guide investment in 2002.
Posts: 3255 | From: Los Angeles California | Registered: Jan 2006
| IP: Logged |
posted
Macrovision-Gemstar: Conference Call: Synergies; Magazine Future; Stock Jitters; $800m Debt By Joseph Weisenthal - Fri 07 Dec 2007 06:06 AM PST
The way to view this morning’s announcement, that Macrovision (NSDQ: MVSN) will buy Gemstar-TV Guide, is in the context of its earlier deals for Mediabolic and AMG. As CEO Fred Amoroso explained on the call, Mediabolic enables the delivery of content across consumer devices, while AMG supplies the data that identifies that content. Gemstar, then, adds “the most critical part of the puzzle”: discovery. “In the future, we believe the guide will form the homepage for the total media entertainment experience.” With these components, the company says it can help operators and consumer electronics manufacturers offer consumers the ability to access their entire content library through a single platform.
Synergies: In addition to the above, Amoroso outlined some specific, immediate ways in which the combination could drive revenue growth. AMG does data licensing, but has never had TV information, so this will help on that front. Conversely, Gemstar-TV Guide has years of data on TV and movies, but has never been in the data licensing business, so there’s an opportunity to cross-sell. At first, CFO James Budge would only say that the deal would offer “significant” cost savings over the coming year. Later on, when pressed, he pegged it around $50 million.
TV Guide magazine & network: During the Q&A there was a question about the future of the magazine and the television network, which don’t seem central to the vision. Officially, there’s no plan to divest of them, but it sounds like a possibility. Amoroso: “[I plan to] spend more with rich and his team before making any decision about their strategic value.” He then added that the magazine shouldn’t be seen as a magazine, but rather another platform for delivering TV Guide information.
Other options: Gemstar-TV Guide CEO Rich Battista spent some time describing the company’s decision, from its originally announced plan to seek strategic alternatives. There were other options (he declined to get into specifics), but ultimately, “A transaction with Macrovision represented the most compelling opportunity to deliver stockholder value.” What made this deal attractive was the combination of cash and stock, allowing shareholders to retain a sizable stake in the combined company.
Transaction: As Budge explained, the deal will technically involve the creation of a new holding company comprising of the two firms. The cash component of the acquisition will be financed via the combined cash of the two companies, and up to $800 million in debt financing, comprised of a $650 million term loan and a $150 million bridge facility, to be tapped in the event that other outside financing is not found.
Growth: Macrovision has done YTD revenue of $199 million, with a total year estimate of $283 million. GMST is over twice as big on the revenue side, having done $473 million YTD. Going forward, the companies are targeting annual revenue growth of 10-15 percent, for at least the next few years. They also anticipate being able to pay down debt within 3-4 years, based on annual free cash flow greater than $200 million. Full financial details are available in slides filed with the SEC.
Market reaction: As the the Q&A wore on, there was definitely a change in tone, as callers watched the shellacking that both companies’ shares are taking today. Battista stuck to his guns, that the deal offered a significant premium from where the company was in July. Amoroso acknowledged that it was a big, complex deal, that would require $800 milllion in debt, and so market skittishness was understandable. Nonetheless, he added, “we are compelled by the strategic vision of what the companies can offer.” It was added that market swings would not affect News Corp.’s (NYSE: NWS) support of the merger.
Breakup fee: Near the end, a questioner asked whether there was a breakup fee associated with the deal. The first answer: “there is, and we won’t quantify it… that will all come out.” Second answer, after some mumbling: just under $56 million.
Disclaimer: Macrovision is a sponsor of paidContent.org.
Posts: 3255 | From: Los Angeles California | Registered: Jan 2006
| IP: Logged |
UBBFriend: Email this page to someone!
Printer-friendly view of this topic
