SANTA CLARA and NOVATO, Calif. 12/22/2010 – Rovi Corporation (NASDAQ: ROVI) and Sonic Solutions (NASDAQ: SNIC) today announced that the two companies have signed a definitive agreement for Rovi to acquire Sonic in a stock and cash transaction. The enterprise value of the transaction is approximately $720 million and the per share value of Sonic common stock at signing of the agreement is $14.17, a 38.2 percent premium to Sonic’s 30 day average per share closing price as of December 21, 2010. The acquisition is structured as an exchange offer for all of the outstanding shares of Sonic common stock, to be followed by a merger.
Rovi, a provider of next generation guidance solutions including TotalGuide, discovery, metadata, advertising and networking technologies and Sonic, a provider of digital video processing, playback and distribution technologies, both leaders in the digital entertainment industry, together will bring an end-to-end solution that enables integration across the ecosystem. The acquisition of Sonic will enable Rovi to broaden its solutions to content owners, device makers, retailers and operators.
Sonic has licensed its industry leading cloud-based digital media delivery infrastructure known as RoxioNow, to major retailers, movie studios and CE manufacturers. RoxioNow incorporates a catalog of over 10,000 movies and TV programs, which are accessible through connected CE devices such as digital televisions, Blu-ray players and mobile phones. The RoxioNow technology is expected to be on over 30 million connected devices by June 2011. Sonic’s DivX offering is distributed in over 350 million CE devices. The DivX player software has been downloaded over 100 million times per year and 500 million times cumulatively, and has had over 2.5 billion launches since 2009. Sonic’s broad offerings coupled with Rovi’s guide software and metadata will generate an expanded solution and a richer user experience. With a footprint spanning hundreds of millions of devices and households, Rovi believes this will expand its advertising distribution opportunity.
The combined company will be able to power the next generation of digital entertainment offerings with content discovery, delivery, and enhanced interactivity capabilities that support advertising and drive consumer engagement. Integration between RoxioNow and TotalGuide has already occurred as part of the TotalGuide general availability release – RoxioNow’s retail customers are supported through TotalGuide. In the future, Rovi expects to power RoxioNow’s user experience with the same web services that power TotalGuide. Rovi believes this integration will result in accelerated uptake of premium content.
“Rovi and Sonic share a vision for the future of digital entertainment and how to deliver the best consumer experience possible,” said Fred Amoroso, president and CEO of Rovi Corporation. “We believe Sonic has built an exciting portfolio that complements Rovi’s TotalGuide as well as our broad portfolio of solutions. Together, we believe the two companies will be able to address the expanding digital entertainment market with unique capabilities that will bring enhanced value to consumers.”
“The digital entertainment sector is transforming at a faster rate than just a year or two ago and consumers are seeking new ways to discover and enjoy digital content, specifically premium content.” said Dave Habiger, president and CEO of Sonic Solutions. “By joining forces with Rovi, we will provide the industry with a broad range of solutions that strengthens our customers’ ability to compete as consumers’ primary source for digital entertainment. For our Hollywood studio partners, eager to expand digital delivery, the larger footprint of our combined company enables them to market their content broadly.”
Under the terms of the agreement, which has been approved by both Boards of Directors, Sonic shareholders may elect to receive either $14.00 or 0.2489 shares of Rovi common stock for each share tendered and accepted in the exchange offer, subject to proration and adjustment pursuant to the definitive agreement. Cash consideration paid in the exchange offer will equal 55 percent of the aggregate value of consideration paid in the exchange offer and stock consideration issued in the exchange offer will equal 45 percent of the consideration, with shares of Rovi common stock being valued at $56.24 (the average closing price of Rovi common stock over the 20 trading days ending immediately prior to the date of the agreement) for purposes of such calculation. Upon consummation of the exchange offer, Rovi intends to complete a merger in order to acquire all the shares of Sonic common stock that remain outstanding after the completion of the exchange offer. If the initial exchange offer and related actions permitted by the agreement do not result in Rovi owning at least 90 percent of the outstanding shares of Sonic common stock, the consideration paid to Sonic shareholders in the merger may consist entirely of Rovi common stock at an exchange ratio of 0.2489 shares of Rovi common stock. Upon completion of the merger, Sonic Solutions will become a wholly-owned subsidiary of Rovi.
Rovi intends to commence an exchange offer for all of the outstanding shares of Sonic Solutions in January 2011, which will remain open for at least 20 business days. Sonic directors and senior management, who own approximately 11.2% of Sonic’s total equity, have agreed with Rovi to tender their shares and to vote any remaining shares that they own for the merger.
The transaction is subject to customary closing conditions and regulatory approvals, as well as the valid tender of a majority of the outstanding shares of Sonic common stock in the exchange offer, on a fully-diluted basis. The exchange offer is expected to close during the first quarter of 2011.
Rovi will use cash on hand to fund the cash portion of the consideration and the transaction is not contingent on any debt financing. Separately, however, Rovi intends to raise approximately $500 million of non-convertible term loan financing, which it expects to use for general corporate purposes, including the repurchase of its common stock and its outstanding convertible notes from time to time, depending on market conditions. Rovi’s Board of Directors has authorized up to $400 million in stock purchases and up to $200 million in purchases of Rovi’s outstanding convertible notes.
Rovi also announced that it is raising and narrowing its estimates for 2010 to a range of $538-$542 million for revenue and $2.08-$2.12 for Adjusted Pro Forma Income Per Common Share. This transaction is expected to generate over $15 million in synergies in 2011 and be $0.05 to $0.10 accretive to 2011 Adjusted Pro Forma Income Per Common Share.
Sonic was advised by William Blair & Company, LLC and Morrison & Foerster, LLP. Cooley LLP acted as legal adviser and JPMorgan acted as financial advisor and delivered a fairness opinion to the Rovi board of directors.