Is Macrovision Buying Again?

by: 451 Research: Inorganic Growth

by Yulitza Peraza

Since the start of 2008, Macrovision (MVSN) has put on hold its previously active acquisition program and has instead focused solely on divestitures. Now, it looks like the company may be done shedding businesses and may actually look to add them. The switch comes as Macrovision dumped its tremendously unprofitable eMeta business for an estimated $800,000 in November (down significantly from the $35m it paid for the unit in 2006), and finally closed its $255m TV Guide Network sale to Lionsgate (LGF) in March. Macrovison popped back up as a buyer for the first time in 10 months in mid-April, purchasing Muze from Enterprise Partners Venture Capital for $16.5m.

Macrovision’s portfolio cleanup hasn’t been lost on Wall Street. Shares of the digital home entertainment giant are up 60% so far this year, pushing its market capitalization to about $2bn. It also holds nearly $300m of cash and short-term investments in its treasury. On the other side of the balance sheet, it holds some $888m of debt. Investors will get their latest update on Macrovision on Thursday, as the company is slated to report first-quarter earnings.

In terms of M&A, Macrovision tells us it’s ready to continue shopping, albeit opportunistically. (We suspect that, given its current debt load, the firm won’t be looking at large deals.) As possible targets, we would highlight a pair of micro-cap digital content companies. First, OpenTV (OPTV-OLD), an interactive TV broadcasting middleware vendor that is already reviewing an outright takeover offer by Kudelski Group, which already owns 28% of the company. (OpenTV shares are trading above the offer price, but even then the firm is valued at only twice its cash holdings.) A second possibility is SeaChange (NASDAQ:SEAC), a digital video storage & distribution vendor that trades at just 0.6x enterprise value/trailing 12-month revenue. Picking up either company would help to bolster Macrovision’s standing in the digital content distribution market as well as enhance the value of its metadata search business. (click on chart to enlarge)

Macrovision’s buying and selling since 2002

Source: The 451 M&A KnowledgeBase

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