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Gemstar-TV Guide Sold for $2.8 Billion

Stocks plummet on news of deal.



By Dylan Stableford and Bill Mickey
12/07/2007

Gemstar-TV Guide’s six month search for a potential buyer is over. Macrovision Corporation, a Santa Clara, California-based digital software solution firm, has agreed to acquire Gemstar for $2.8 billion in cash and stock, the companies announced today.

The transaction—56 percent cash and 44 percent stock—is pending shareholder approval at both companies. The board of Gemstar unanimously approved the transaction, the company said today. Rupert Murdoch's News Corp., which owns 41 percent of Gemstar, has agreed to vote in favor of the deal.

Wall Street, though, was not impressed. News of the deal sent shares of both companies plummeting. Macrovision shares fell 22 percent to $20.35; Gemstar shares dipped 16 percent to $4.99.

If the deal is approved, Macrovision CEO Fred Amoroso and CFO James Budge will become CEO and CFO, respectively, of the combined company, replacing Gemstar-TV Guide CEO Rich Battista and CFO Bedi Singh.

During a conference call this morning, Amoroso said no decisions have been made about TV Guide’s 3.2 million circulation magazine or its publishing division, and that he would need time to study that part of the company before disclosing his plans for the magazine. "I don't have a deep background in that area,” Amoroso said.

“I assumed TV Guide was part of it. They were trying to sell it all in a package,” says Reed Phillips, principal of media investment firm DeSilva + Phillips. Gemstar announced in July that it was exploring strategic alternatives. “I think the magazine is integral to the business from what I've heard."

Nonetheless, Macrovision’s main interest in Gemstar-TV guide appears to be data. The company hopes to give customers access to information about television shows and music libraries across a variety of devices and platforms.

Through the first three quarters of 2007, Gemstar-TV Guide had $472 million in revenues, with an operating income of $72 million. Projected revenue for 2007 for Gemstar-TV Guide is $631 million, with projected EBITDA of $115 million. Amoroso expects the combined company to achieve 10 to 15 percent growth in annual revenues over next five years.

SEE ALSO: AP Coverage of Deal

By Dylan Stableford and Bill Mickey
12/07/2007




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