TiVo Merging With Xperi In $3 Billion Deal

By Amit Chowdhry ● Dec 19, 2019
  • Xperi Corporation and TiVo Corporation announced a definitive agreement to combine in an all-stock transaction representing $3 billion of combined enterprise value

Xperi Corporation and TiVo Corporation announced they have entered a definitive agreement to combine in an all-stock transaction, representing approximately $3 billion of combined enterprise value. And this transaction creates a leading consumer and entertainment technology business and one of the industry’s largest intellectual property (IP) licensing platforms with a diverse portfolio of entertainment and semiconductor intellectual property.

This merger agreement provides for a 0.455 fixed exchange ratio, which is at a 15% premium to TiVo’s shareholders based on each of Xperi’s and TiVo’s 90-day volume-weighted average share prices. Upon the closing of the deal, Xperi shareholders will own approximately 46.5% of the combined business, and TiVo shareholders will own approximately 53.5%.

This deal also combines two technology pioneers who have shaped how millions of consumers access and experience entertainment content and whose innovations are found in billions of devices around the world. And it serves hundreds of businesses ranging from content providers to consumer electronics and automotive manufacturers, the combined entity will provide an amazing entertainment platform for tens of millions of individual consumers and create a powerful platform for the discovery, delivery, and monetization of content.

As the volume of entertainment content has exploded with more ways than ever before to access it. And TiVo’s leading content aggregation, discovery, and recommendation capabilities enable viewers to more easily find, watch, and enjoy entertainment. When it is coupled with Xperi’s strong presence and product capabilities in the home, automotive, and mobile device ecosystems, the combined company will have a unique industry platform to address an ever-increasing consumer desire to enjoy entertainment anywhere, anytime, on any device.

“This landmark combination brings together two highly complementary companies poised to set the industry standard for user experiences across the digital value chain,” said Xperi chief executive officer Jon Kirchner. “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.”

Plus the combination will create an intellectual property licensing platform that spans a number of the largest addressable markets in entertainment content, consumer electronics, and semiconductors. And 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. The combined business will also benefit from greater research and development capabilities as well as customer diversification.

“There is more content, and more ways to enjoy that content, than ever before,” added TiVo president and CEO Dave Shull. “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 complementary 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 combined company plans to focus on integrating their respective product and IP licensing businesses initially. And together, the companies expect to benefit from a larger and stronger platform to drive growth and innovation, accelerate time-to-market, and improve IP licensing monetization and outcomes. Plus the product business expects to pursue substantial cross-selling opportunities especially in its home and automotive markets.

The new company had $1.09 billion in TiVo revenue and Xperi billings along with more than $250 million in operating cash flow on a pro forma basis for the 12 months ended September 30, 2019. And the combined company expects to deliver revenue synergies by bringing innovative solutions to consumer electronics and auto companies to help address the shift in media and entertainment distribution and consumption.

“TiVo’s management team and board have engaged in a comprehensive review of TiVo’s businesses over the past year, and we are confident that this combination with Xperi is the right path forward for all our stakeholders. While we previously planned to separate our product and IP licensing businesses in April 2020 , we believe today’s combination with Xperi will enable us to create even more value for our shareholders in both the near and long term by allowing each to go to market with greater financial and operational scale,” Shull explained.

In terms of the merger agreement, the shares of TiVo and Xperi stockholders will be converted into the shares of the new parent company based on a fixed exchange ratio of 0.455 Xperi share per existing TiVo share. And upon completion of the merger, Xperi stockholders will own approximately 46.5% and TiVo stockholders will own approximately 53.5% of the new parent company on a fully diluted basis.

In connection with the transaction, each company’s debt will be refinanced on a combined basis. And to meet this objective, the companies secured $1.1 billion of committed financing from Bank of America and Royal Bank of Canada. After the completion of the transaction, Kirchner will serve as CEO of the new parent company and Xperi CFO Robert Andersen will serve as Chief Financial Officer. And Shull will continue as a strategic advisor to ensure a successful integration. The board of directors will consist of 7 directors.

Centerview Partners, LLC served as exclusive financial advisor to Xperi and Skadden, Arps, Slate, Meagher & Flom LLP served as legal advisor. LionTree Advisors LLC served as exclusive financial advisor to TiVo and Cooley LLP served as legal advisor. Cooley’s team was led by Jon Gavenman, Steven Tonsfeldt, and Ian Nussbaum.