TiVo today said it’s merging with Xperi in an all-stock transaction, representing about $3 billion of combined value. The merger agreement provides for about a 15% premium to TiVo’s shareholders. At close, Xperi shareholders will own approximately 46.5% of the combined business, and TiVo shareholders will own approximately 53.5%.
Following the completion of the transaction, which is expected in the second quarter of 2020, Xperi’s CEO Jon Kirchner will serve as CEO of the new company, and Xperi’s CFO Robert Andersen will serve as CFO. TiVo’s CEO David Shull won’t continue in a leadership role, but he “will continue as a strategic advisor to ensure a successful integration,” according to the companies.
The new parent company will assume the Xperi name, but will continue to provide entertainment services under the TiVo brand. The company will be headquartered in San Jose, California.
TiVo is a familiar name in the over-the-top video world, but who the heck is Xperi? The San Jose-based company seems to be primarily a semiconductor firm that licenses intellectual property (IP) in areas such as mobile computing, memory and data storage. The companies’ announcement today says Xperi brings capabilities in the home, automotive, and mobile device ecosystems.
Both companies bring IP portfolios that span entertainment content, consumer electronics and semiconductors. The combined entity will own more than 10,000 patents and applications with minimal licensee overlap.
In a conference call with media and analysts this morning, the companies displayed a slide, showing their respective major customers. While TiVo’s big customers include distribution outlets such as Fox, Dish and HBO, Xperi’s customer footprint includes original equipment manufacturers and technology vendors such as LG, Panasonic and Sharp.
On the media call, Shull said the world of streaming video has become much more complex and chaotic for consumers. “The new Xperi can help consumers cut through the entertainment chaos,” said Shull. “Tivo technology will apply the intelligence that allows consumers to discover what they want, while Xperi powers the actual experience through immersive audio and advanced imaging. Through Xperi's channels, we will bring TiVo capabilities into TVs.”
Shull, who may not actually be around for the long-haul, also said Xperi will “revolutionize the in-cabin automotive experience” by integrating TiVo technology.
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The companies say their first step is to integrate their respective product and IP licensing businesses so they can pursue cross-selling opportunities, especially in the home and automotive markets.
Together, the two companies would have had $1.09 billion in revenue/billings and more than $250 million in operating cash flow on a pro forma basis for the twelve months ended September 30, 2019. They expect to achieve at least $50 million of annualized run-rate cost savings by year-end 2021.
TiVo had been in the process of separating its product and IP businesses. But in light of its merger with Xperi, that plan has been modified. 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. This will facilitate a potential separation of the combined businesses at a later date.