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TiVo merging with Xperi in $3B deal

Xperi Corp. and TiVo Corp. entered into a merger agreement in an all-stock transaction, representing about $3 billion of combined enterprise value.

Upon closing of the transaction, Xperi shareholders will own about 46.5% of the combined business, and TiVo shareholders will own about 53.5%. Shares of TiVo and Xperi stockholders will be converted into the shares of the new parent company based on a fixed exchange ratio of 0.455 Xperi share per existing TiVo share. The agreement implies a 15% premium to TiVo's shareholders based on each of the companies' 90-day volume-weighted average share prices.

The new parent company will be headquartered in San Jose, Calif., and will assume the Xperi name but will continue to provide entertainment services under the TiVo brand.

The combined companies will initially focus on bringing together their respective product and IP licensing businesses, with the goal of creating an intellectual property licensing platform for various addressable markets in entertainment content, consumer electronics and semiconductors. Xperi and TiVo brings together more than 10,000 patents and applications, with minimal licensee overlap.

Each company's respective product and IP businesses will be integrated and operated as separate IP licensing and product business units. The integration of their product and IP licensing businesses expect to have at least $50 million of annualized run-rate cost savings by the end 2021, with the majority expected within the first 12 months after closing.

TiVo suspended its near-term plan to separate its product and IP businesses following the merger agreement. Xperi CEO Jon Kirchner and CFO Robert Andersen will take the same roles at the new parent company, while TiVo CEO David Shull will continue as a strategic adviser and oversee the integration process.

The new company had $1.09 billion in TiVo revenue and Xperi billings and more than $250 million in operating cash flow on a pro forma basis for the 12 months ended Sept. 30.

Following the agreement, each company's debt will be refinanced on a combined basis. Xperi and TiVo secured $1.1 billion of committed financing from Bank of America Corp. and Royal Bank of Canada in line with the combined debt refinancing.

Xperi and TiVo boards approved the transaction, which is expected to close during the second quarter of 2020, subject to approvals from regulators and the companies' shareholders, along with other customary closing conditions.

Centerview Partners LLC served as exclusive financial adviser to Xperi and Skadden Arps Slate Meagher & Flom LLP served as its legal adviser. Meanwhile, LionTree Advisors LLC served as exclusive financial adviser to TiVo and Cooley LLP served as its legal adviser.