• FOLIO: Wall Street Not Impressed
SANTA CLARA, Calif. – Macrovision Corp., which develops technology to prevent unauthorized copying and viewing of video, music and other content, said Friday it will buy television listings provider Gemstar-TV Guide International Inc. for $2.8 billion in cash and stock.
Macrovision 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’s programming data.
"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.
The executive did 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.
Macrovision shares tumbled 20 percent, or $5.22, to $20.77 at the open of trading Friday. Gemstar shares fell more than 9 percent, or 55 cents, to $5.43.
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.
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.