Rovi Agrees to Acquire DVR Pioneer TiVo in $1.1 Billion Deal

  • Company to take TiVo name, be led by Rovi CEO Tom Carson
  • TiVo's `substantial' intellectual property a big draw for Rovi

Rovi Corp. agreed to buy digital-video recording pioneer TiVo Inc. in a deal valued at $1.1 billion, adding crucial patents for cable set-top boxes just as competition for those devices is heating up.

Rovi will pay $10.70 a share in cash and stock, a 40 percent premium over TiVo’s $7.66 closing price on March 23, the last trading day prior to a New York Times report about a possible deal, according to a statement Friday. The on-screen TV guide provider’s offer breaks down to $2.75 a share in cash and $7.95 a share in common stock of the new company.

The deal combines two TV-technology patent holders at a time when cable operators like Comcast Corp. and tech companies including Google, Apple Inc. and Amazon.com Inc. are all vying for control of the household set-top box -- the tiny devices that zoom news, sports and entertainment to TVs.

The Federal Communications Commission is proposing to liberate U.S. customers who rent such boxes from the cable companies and pay, on average, $231 a year to lease them. The FCC proposes letting consumers buy their own boxes or alternatives, which would open up what is now a largely closed market, according to research from Bloomberg Intelligence analysts Brad Barker and Woo Jin Ho.

TiVo, which once was the default verb to describe the act of digitally recording TV, has long battled cable providers to sell its boxes directly to consumers. Comcast prefers to build its own set-top box software, using proprietary technology. To use a TiVo set-top box, a customer must pay a monthly fee from $1.50 to $4 to rent a so-called cableCARD from the cable company, in addition to TiVo’s monthly subscription rate.

Rovi, with a market value of about $1.4 billion, relies on licensing revenue from its on-screen TV guides and has recently fought Comcast, Amazon and Netflix Inc. over patent-infringement claims. The Santa Clara, California-based company, formed through the 2008 merger of Macrovision and Gemstar, is one of the largest owners of patents for digital entertainment devices.

“This deal was driven by an increasingly competitive set-top box market,” Paul Sweeney, an analyst at Bloomberg Intelligence, said in an e-mail Friday. “Cable operators such as Comcast are investing serious capital to develop next-generation boxes that are threatening the TiVo and Rovi platforms.”

Shares of TiVo rose as much as 6.3 percent to $10.01 in New York Friday, and were trading at $10 at 9:33 a.m. The stock had climbed 9.2 percent this year through Thursday. Rovi surged as much as 13 percent to $19.61.

Similar Companies

The two businesses are so similar that a combination was seen as compelling in terms of both revenue and cost synergies, Bloomberg News reported Thursday. The combined entity will take the TiVo name and be led by Rovi Chief Executive Officer Tom Carson, according to the statement.

The new company is expected see $100 million in annual cost savings and $800 million in revenue this year on a pro-forma basis after purchase accounting adjustments.

In addition to IP licensing, TiVo strengthens Rovi’s position in media discovery, metadata and analytics, Carson said in the statement.

TiVo successfully settled several patent infringement lawsuits over the devices in recent years, including with Alphabet Inc.’s Google, Cisco Systems Inc. and Dish Network Corp.

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