TiVo and Xperi have announced they will merge in an all-stock transaction, creating a giant consumer and entertainment tech business representing the industry’s largest intellectual property (IP) licensing platform along with a diverse portfolio of entertainment and semiconductor IP.
The combined company will look to offer unique solutions for the home, automotive, and mobile markets, representing approximately $3 billion in combined enterprise value. Upon approval of the merger, Xperi shareholders will own approximately 46.5% of the combined business, with TiVo shareholders owning approximately 53.5%.
“There is more content, and more ways to enjoy that content, than ever before,” said David Shull, CEO of TiVo. “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 deal will see TiVo’s content aggregation, discovery, and recommendation capabilities coupled with Xperi’s product capabilities in the home, automotive, and mobile device ecosystems. The merger will also create an IP licensing platform that spans entertainment content, consumer electronics, and semiconductors. More than 10,000 patents and applications are represented in the merger.
“This landmark combination brings together two highly complementary companies poised to set the industry standard for user experiences across the digital value chain,” said Jon Kirchner, CEO of Xperi.
“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 new company represents $1.09 billion in TiVo revenue and Xperi billings and more than $250 million in operating cash flow for the past 12 months, ended Sept. 30. The companies expect to achieve $50 million of annualized run-rate cost savings by the end of 2021 thanks to the integration of respective product and IP licensing businesses.
The deal also calls for TiVo to suspend its plans to separate its product and IP businesses.
“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,” Shull said. “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.”
Kirchner will serve as CEO of the new parent company and Shull will stay on as a strategic advisor. The new parent company will assume the Xperi name, and will provide entertainment services under the TiVo brand.
This transaction has been approved by the boards of both companies and is expected to close during the second quarter of 2020.