Macrovision and Gemstar shares drop

SANTA CLARA, Calif. (AP) — Shares of Macrovision and Gemstar plunged Friday as investors soured quickly on a deal that would have the media technology company buy out the television listings business for $2.8 billion in cash and stock.

Macrovision Corp. wants to allow consumers to call up information about TV shows, view personal photos or access music libraries on a variety of electronic devices through a combination of its security software and Gemstar-TV Guide International Inc. programming data. Macrovision develops technology to prevent unauthorized copying and viewing of video, music and other content.

Wall Street apparently did not like the matchup, sending shares of both companies falling.

Macrovision CEO Fred Amoroso not disclose plans for Gemstar-TV Guide’s print operations, saying he would need time to understand that business before making decisions. “I don’t have a deep background in that area,” he said.

The company’s flagship magazine has struggled with falling circulation and advertising revenue as viewers increasingly access programming data through their TV sets or online.

Gemstar-TV Guide shareholders will receive $6.35 in cash or 0.2548 of a share of common stock in a new holding company that will own both Gemstar-TV Guide and Macrovision. The cash component of the deal won’t exceed $1.55 billion. The $6.35 per share value represents a premium of 6.2 percent to the Gemstar closing price Thursday, and is 25 percent above Gemstar’s closing price before it announced a strategic alternatives review July 9.

In a filing with the Securities and Exchange Commission, Macrovision said it will raise $800 million of new debt to finance the acquisition, and said JP Morgan and Merrill Lynch have agreed to commit funds.

The board of the Los Angeles-based television media company has unanimously approved the transaction, which is expected to close by early second quarter 2008. Rupert Murdoch’s News Corp., which owns about 41 percent of Gemstar-TV Guide, has agreed to vote in favor of the deal.

Macrovision stockholders will continue to own one share in the new company for each share held at closing. When the deal is completed, Macrovision shareholders will own about 53 percent of the combined company, and former Gemstar-TV Guide stockholders will own 47 percent.