With the deadline for the final settlement between DVR specialist TiVo and EchoStar and DISH Network looming, a number of analysts have speculated that one potential outcome might be for EchoStar to make a bid for TiVo.
Following the appeal court ruling…
With the deadline for the final settlement between DVR specialist TiVo and EchoStar and DISH Network looming, a number of analysts have speculated that one potential outcome might be for EchoStar to make a bid for TiVo.
Following the appeal court ruling in TiVo’s favour in March, EchoStar and DISH Network have until April 30 to end their continued patent violation and develop an approved workaround, otherwise they are likely to be forced to switch off their digital video recording services for almost 8 million customers.
In light of that, a number of Wall Street analysts have hypothesised that one solution would be for EchoStar to make a bid for TiVo. The logic centres on a tie-up between TiVo’s DVR technology and EchoStar’s Sling Media and set-top box subsidiaries. The argument also points to the Q2 2009 indemnification for EchoStar from any TiVo liabilities as well as a derisking of DISH’s DTH business due to EchoStar subsequently owning TiVo’s intellectual property.
However, such a move would be extremely ambitious, even for a dealmaker as well versed in the art as Charlie Ergen. The most obvious hurdle is that, based on the two parties’ current market capitalisations, it would constitute a reverse takeover to the tune of more than US$400m and would likely require a significant amount of debt to support the deal.
Since the March 4 appeals court ruling, TiVo’s share price has rocketed by more than 80% to approximately US$18.50 (as of press time), giving it a market cap of US$2.08bn. EchoStar, whose share price, despite the odd spike, has remained relatively stable at US$19.60 during that same period, has a market cap of US$1.66bn.
Citigroup analyst Jason Bazinet speculated that EchoStar would look to make a cash and share offer worth US$2.3bn. However, Edward Williams, an analyst at BMO Capital, recently suggested that despite its rapid recent rise, TiVo’s share price could go higher, and he gave it a target price of US$25 per share. That would give it a market cap of closer to US$2.83bn.
