Rovi has agreed to acquire TiVo for USD 10.70 per share in cash and stock, translating into a total of USD 1.1 billion. The new company will continue to be led by Rovi CEO Tom Carson and upon closing of the transaction will adopt the TiVo brand as the new company name. The offer represents a premium of 40 percent over TiVo’s closing price on 23 March. Rovi will finance the deal from cash on hand. The combined company will then have an estimated USD 150-270 million cash on hand at closing.
The board of directors of the combined company will include participation from TiVo’s current board. The combined company will serve nearly 500 service providers across countries, adding more than 10 million TiVo-served households to Rovi’s current base of 18 million households using Rovi guides worldwide. Together, Rovi and TiVo have worldwide portfolios of over 6,000 issued patents and pending applications worldwide.
On a pro forma basis, the combined company is expected to have more than USD 800 million in revenue after accounting adjustments. Annual synergies are forecast at a minimum of USD 100, with 65 percent realized in the first 12 months. The expected synergies are in addition to TiVo’s targeted current year USD 32 million adjusted EBITDA increase from restructuring and margin improvements. The transaction is expected to be accretive to Rovi’s adjusted earnings per share within the first full year after close.
The boards of both companies have approved the transaction, which is still subject to customary closing conditions. The acquisition is expected to close in the third quarter.
The stock consideration of the price is subject to a two-way collar between average Rovi stock prices of USD 16.00 and USD 25.00 to take into account share price increases between the agreement date and the closing. Post-transaction, current Rovi shareholders will own 66.8-72.9 percent of the pro forma shares outstanding in the new holding company.
Rovi’s board approved the adoption of a Stockholder Rights Plan (the NOL Rights Plan,) designed to protect Rovi’s USD 1.2 billion federal net operating losses (NOLs) from the effect of Section 382 under the US Internal Revenue Code, which can limit the use of the NOLs. The stockholders of Rovi will be provided the opportunity to vote on the new holding company charter in connection with the approval of the transaction.
