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TiVo and Xperi to Merge in $3 Billion Deal

TiVo made an announcement earlier in the year that they were preparing to “split itself into two,” becoming a product as well as an IP business. The sole aim for this change in business was to make the company more appealing to potential buyers. However, those plans have now been paused thanks to a $3 billion merger with technology licencor Xperi Corporation, creating “one of the largest licensing companies in the world.”

Both companies will see their product businesses alongside their IP licensing businesses unified together with the goal that they will be operated as two separate companies, allowing the potential of a sell off for one of the units in the future.

As a result of the merging of both TiVo and Xperi – a licensing company specializing in semiconductor technology as well as owning several A/V brands – the new company is to be named Xperi, operating in San Jose, California. They will keep the TiVo brand and continue to promote their entertainment services alongside Xperi’s HD Radio, IMAX Enhanced and DTS brands.

Once the deal has been completed the new company will see Jon Kirchner, Xperi’s current CEO, will become CEO of the parent company while Xperi’s Robert Anderson will continue in his role as CFO. However David Shull, TiVo’s CEO, will stay on as a strategic investor until the deal has been finalized. Kirchner will also be on the new company’s board alongside six other directors, 3 to be appointed by Xperi and 3 by TiVo.

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Following the news it was also announced that all stockholder shares from both companies will automatically be converted into shares in the new company, on the fixed ratio of 0.4555 Xperi share per existing TiVo share. Once completed, TiVo stockholders will own around 53.5% of the company while Xperi stockholders will own 45.5%.

Royal Bank of Canada and Bank of America will refinance the debt that each company currently has –totaling $1.1 billion between them – on a combined basis. The companies also announced that there is currently $1.09 billion in Xperi billings and TiVo revenue plus over $250 million in operating cash flow. These figures are for the twelve months ending 30 September 2019 and are on a pro forma basis.

The $3 billion sum is the total value of TiVo and Xperi with both companies viewing the deal as a merger, rather than a takeover. Yet according to reports TiVo has been valued at around $1.2 billion in this deal so the fully diluted equity value of the new company would be $2.4 billion, while the enterprise value is around $3 billion.

Rovi originally bought TiVo in 2016 for $1.1 billion – mainly for the vast amount of patents they hold – and kept the TiVo name once the deal was completed. Since then TiVo – who were once a leader in DVRs – has found it difficult to contain consumer interest thanks to market changes which has seen an increase in smart TVs as well as media players such as Fire TV, Apple TV and Roku.

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TiVo branded software and technologies have continued to be sold to cable operators Virgin Media, Suddenlink, Mediacom and many others, however TiVo started moving away from the sale of hardware, instead focusing more on providing software to third-party devices. They have also secured patent-licensing deals with several pay-TV operators – Sky, Cox, Charter, Altice USA, Verizon and AT&T to name a few – however they have also been tied to a legal dispute with Comcast.

Between them, the two separate companies have a patent portfolio of more than 10,000 patents as well as applications with “minimal overlap.”

On top of this, the new company are working on how they can grow TiVo’s content aggregation and discovery as well as their recommendation capabilities, making sure they include Xperi’s auto, home and mobile devices. Alongside these plans, TiVo are aiming to present their product news at this January’s CES, meaning more information will soon be available.

In a statement, Jon Kirchner confirms:

“This landmark combination brings together two highly complementary companies poised to set the industry standard for user experiences across the digital value chain. Together, we will be able to integrate TiVo’s leading content aggregation, metadata, discovery, and recommendation capabilities with our home, automotive, and mobile technology solutions to help our customers create experiences that excite and delight consumers.

Additionally, the combined company will continue to unlock the value of our strategic and sizable patent portfolios by bringing together our deep industry expertise and powerful innovation engines. Through greater scale and diversity, we will deliver attractive and sustainable long-term cash flow and shareholder value.”

TiVo’s Shull also highlighted the fact that Xperi’s annual licensing business has more than 100 million connected TV units benefiting from TiVo’s technology as well as relationships with CE manufacturers, automotive OEMs and content providers, all of whom are also benefiting from TiVo’s technology.