Buy out play

[BadThad]

Should be interesting today:

Macrovision to Buy Gemstar-TV Guide for $2.8 Billion (Update3)

By Sarah Rabil and Lars Klemming

Dec. 7 (Bloomberg) -- Macrovision Corp. agreed to buy Gemstar-TV Guide International Inc. for $2.8 billion in cash and stock, adding interactive program listings to software that protects TV shows and movies from piracy.

Shareholders will get $6.35 in cash for each Gemstar share, or Macrovision stock at a ratio of 0.2548, the Santa Clara, California-based company said today in a statement. The cash offer is 6.2 percent higher than Gemstar's closing price of $5.98 yesterday, and the stock portion is 11 percent more.

The companies plan to combine their products to offer copyright-protected libraries of commercials, TV shows, movies, music and photos across a variety of media devices. Gemstar, based in Los Angeles, put itself up for sale in July at the behest of Rupert Murdoch's News Corp., which has a 41 percent stake.

``The future combination makes a lot of sense from the standpoint of patents and IT and where the industry's going,'' said April Horace, an analyst for Janco Partners in Greenwood Village, Colorado. She recommends buying Gemstar shares and doesn't own any.

Gemstar has gained 49 percent this year in Nasdaq Stock Market trading. Macrovision has declined 8 percent and advanced 33 cents to $25.99 on the Nasdaq yesterday.

Internet Focus

News Corp., based in New York, is getting out of its Gemstar investment as it concentrates on exploiting its acquisitions of Dow Jones & Co., the publisher of the Wall Street Journal, and MySpace, the world's most-popular social-networking Web site.

``News Corp.'s owned Gemstar for many, many years,'' Horace said. ``News Corp. is clearly much more focused on the Internet with its recent acquisitions.''

The combined company will target annual revenue growth of 10 percent to 15 percent, according to a regulatory filing. The margin on earnings before interest, taxes, depreciation and amortization, will be 40 percent, Macrovision said.

Gemstar supplies onscreen listings to cable-television operators and is the publisher of TV Guide magazine. The company reported third-quarter net income of $123.2 million, up from $17.5 million a year earlier because of a tax gain.

Macrovision is spending more than double its own market value to buy Gemstar. Shareholders will own 53 percent of the combined company, and the cash portion of the deal will not exceed about $1.55 billion, Macrovision said. The company has arranged a $650 million loan to help finance the transaction.

`Not Thrilled'

Macrovisions's Fred Amoroso and James Budge will hold their current roles of chief executive officer and chief financial officer at the combined company.

Horace said she was ``not thrilled with the premium'' on Gemstar shares because the shares have been undervalued in the last 30 days. Before today, Gemstar had fallen 14 percent in the past month.

The transaction has been unanimously approved by the boards of both companies and is scheduled to be closed early in the second quarter of 2008.

JPMorgan Chase & Co. advised Macrovision and UBS Investment Bank advised Gemstar in the transaction.