- TiVo and Xperi to merge in definitive agreement valued at $3 billion
- The deal creates one of the industry’s largest IP licensing platforms
- More than 10,000 patents and applications between the two companies
TiVo is combining with Xperi to create “one of the industry’s largest” consumer and entertainment technology and intellectual property (IP) licensing businesses.
TiVo has announced it will enter a definitive agreement to merge with Xperi, a company that sells audio, imaging and computing technology products, with a combined enterprise value of $3 billion.
The deal, which was announced earlier this week, will see the two companies merge to create a major consumer and entertainment technology business, one of the industry’s largest IP licensing platforms, with a diverse portfolio of entertainment and semiconductor IP.
In a statement the two companies said: “Combination significantly enhances the scale and reach for each business, provides opportunity for both revenue synergies and cost savings.”
The transaction combines two technology companies whose innovations are found in billions of devices around the world.
The duo serve hundreds of businesses ranging from content providers to consumer electronics and automotive manufacturers, with the combined entity aiming to provide an “amazing entertainment platform for tens of millions of individual consumers and create a powerful platform for the discovery, delivery, and monetisation of content.”
The merger agreement provides for a 0.455 fixed exchange ratio, which implies a 15% premium to TiVo’s shareholders based on each of Xperi’s and TiVo’s 90-day volume-weighted average share prices. At close, Xperi shareholders will own approximately 46.5% of the combined business, and TiVo shareholders will own approximately 53.5%.
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Xperi chief executive Jon Kirchner said: “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.”
The companies outlined the shared aim to innovate entertainment experiences. With the rise in the volume of content, TiVo will continue to focus on content aggregation, discovery and recommendation capabilities, while Xperi presence and product capabilities in the home, automotive and mobile device systems will create a unique industry player.
With more than 10,000 patents and applications between the two companies and minimal licensee overlap, the combined IP business will be one of the largest licensing companies in the world.
Further, the combined business will benefit from greater research and development capabilities, as well as customer diversification.
TiVo chief executive David Shull said: “There is more content, and more ways to enjoy that content, than ever before.
“In a rapidly expanding and fragmenting digital universe, consumers want and need to be able to easily find and enjoy the content that matters to them. TiVo has always been the company that brings entertainment together.
”Now, we can significantly expand our mission. With Xperi’s annual licensing of more than 100 million connected TV units, and complimentary relationships with major content providers, consumer electronics manufacturers, and automotive OEMs, our combined company will transform the home, car, and mobile entertainment experience for the consumer.”
The new company had $1.09 billion in TiVo revenue and Xperi billings and more than $250 million in operating cash flow on a pro forma basis for the twelve months ended 30 September 30 2019.
The combined company expects to deliver revenue synergies by bringing new, innovative solutions to consumer electronics and automotive companies to help address the massive shift in media and entertainment distribution and consumption.
Additionally, the companies expect to achieve at least $50 million of annualized run-rate cost savings by year-end 2021 through the integration of their respective product and IP licensing businesses, the majority of which are expected within the first twelve months after closing. These cost savings are incremental to those that are expected as a result of TiVo’s ongoing cost-transformation plan.
TiVo has suspended its near-term plans to separate its product and IP businesses. Upon closing of the transaction, each company’s respective product and IP businesses will be integrated and operated as separate IP licensing and product business units.
Following the completion of the transaction, Xperi’s Chief Executive Officer, Jon Kirchner, will serve as Chief Executive Officer of the new parent company and Xperi’s CFO, Robert Andersen, will serve as Chief Financial Officer. TiVo’s Chief Executive Officer, David Shull, will continue as a strategic advisor to ensure a successful integration.
The Board of Directors of the new parent company will consist of seven directors, including Xperi CEO Jon Kirchner, in addition to three directors appointed by Xperi and three directors appointed by TiVo. The Chair of the Board will be selected by the independent directors of the Board.
The new parent company will assume the Xperi name but will continue to provide entertainment services under the TiVo brand, alongside Xperi brands.