Kudelski Group, a provider of content-protection and other digital TV technologies, plans to acquire voting control of interactive TV middleware, applications and advertising solutions provider, OpenTV, via a stock purchase agreement with the latter's corporate parent, Liberty Media (note: OpenTV claims that its software has been deployed in 73 million set-top boxes by 36 operators in 96 countries). The deal, which is subject to various regulatory approvals, is expected to close in the first quarter of next year. The companies are touting the transaction as enabling them to deliver fully integrated products and solutions to digital TV operators, spanning conditional access software, middleware, interactive applications and advertising platforms. However, they are also stressing that the transaction will allow them to continue operating independently and thus to serve some customers on a standalone basis as their requirements dictate.
In 2005, combined revenues from the Kudelski Group companies totaled $550 million. Those companies include Nagravision and its subsidiaries Nagra France, NagraStar, Nagra Plus, NagraCard and NagraID, which provide integrated security software solutions for digital TV; Abilis, Quative and SmarDTV, which develop technologies for mobile phones, IPTV and security; and SkiData, which specializes in public access. Kudelski and OpenTV have frequently worked together on delivering such services as PVR, VOD, EPG's and content syndication for on-demand services, interactive applications, and enabling technologies for interactive advertising. "Aligning ourselves with a global leader in the digital television sector like Kudelski will help us immediately extend our product line-up into new markets and give us access to customers we haven't had relationships with before," OpenTV chairman and CEO, Jim Chiddix, said in a prepared statement. "It will also open up new opportunities that we may not otherwise have had the technical or related resources to address in the near term. We think this deal offers us a myriad of new opportunities to bundle solutions, sell products into Kudelski's existing customer base, save costs through various integration and joint R&D efforts, and collaborate more effectively in several early-stage sectors, such as the digital terrestrial market. And, just as importantly, we expect to do that while retaining the requisite degree of independence necessary to satisfy the needs of all of our existing and potential customers and partners, with a continued focus on maximizing value for all OpenTV stockholders." Added Kudelski Group chairman and CEO, Andre Kudelski: "OpenTV's software has established the global benchmark for set-top box middleware. We also believe it is a company with great potential and very talented people, a gold-plated customer list, and market-leading technologies that will offer both OpenTV and the Kudelski Group, working side by side, real growth opportunities. This transaction was driven, in large part, by recognition of OpenTV's leadership position in advanced digital television and our desire to work more closely with OpenTV to capture additional market share in the rapidly consolidating digital television industry. With digital television households expected to double by 2010, with the landscape for television advertising changing daily, and with the mobile and online video sectors now quickly evolving, we see OpenTV as extremely well-positioned to exploit these opportunities--even more so given the complementary nature of our product offerings."
Under the terms of the deal:
- Kudelski will acquire 6,533,951 Class A ordinary shares and 30,206,154 Class B ordinary shares of OpenTV from Liberty for $3.60 per share--a price that represents a 26% premium over OpenTV's share price as of October 17th, and that results in an aggregate purchase price of $132,264,378. The stake to be acquired represents 26.7% of the economic interest and 74.7% of the voting interest in OpenTV's ordinary shares outstanding as of September 30th.
- Liberty Media will pay OpenTV up to $19.7 million (or $0.14 per share), representing 71.4% of its premium. This is in accordance with a deal between OpenTV and Liberty that was signed last February and that called for Liberty to allocate its premium in this manner (note: OpenTV was not a direct party to the purchase agreement, which was between Liberty and the Kudelski Group). OpenTV will receive $5.4 million of this amount at closing, with the remainder to be paid after an indemnity period.
- Once the transaction is closed, Kudelski plans to appoint Alan Guggenheim as OpenTV's CEO. Guggenheim is currently CEO of NagraStar, a joint venture between the Kudelski Group and OpenTV middleware and applications customer, EchoStar. He also serves as EVP of the Kudelski Group. According to Kudelski, he previously founded a software company in California and has served in senior business development positions for a number of international communications, media and banking companies, including the Dassault Group. Kudelski also plans to appoint Andre Kudelski as chairman of OpenTV's board. Jim Chiddix, meanwhile, will--for the time being at least--assume the role of vice chairman; however, in a conference call with media and analysts that followed the announcement of the Kudelski-OpenTV deal, Andre Kudelski said that Chiddix's future at OpenTV is in an "exploratory phase."
- Once the transaction is closed, the Kudelski Group will consolidate OpenTV's results. However, OpenTV will maintain its listing on NASDAQ.
Originally Published: November 6, 2006 in [itvt] Issue 7.03 Part 1
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