Kudelski, and its Nagravision conditional access subsidiary, after initially saying that it would drop its bid for the rest of the set top middleware specialist Open TV, has come back and put 20 more cents on the bid, upping it from $1.35 to $1.55, all in cash. Kudelski currently owns 32.3% of the total outstanding shares of OpenTV and 77.2% of the voting power, mostly achieved by acquiring shares from Liberty Media.
The bid is being managed through Kudelski Interactive Cayman and it says the offer is not conditioned on a minimum number of Class A shares being tendered, which seems to suggest that it will buy whatever shares are tendered, even if it’s not 100%.
The current share price is artificially around that initial bid price at $1.33, anticipating a rebid, so this is around a 17% premium to that.
The initial $1.35 bid was offered at over a 50% premium to the share price prior to when the bid was first announced. All of which seems to suggest that this is a fair price for OpenTV. However it has been run under the control of Nagravision for some time now, and its share price appears to be artificially depressed.
Kudelski said with the first bid that OpenTV’s needed greater scale and more R&D and therefore a significant amount of new investment and since it only holds 32% of the company, it doesn’t want to be the one to put in all the funding required. But this isn’t true, not really.
We have previously said this is a recession driven, opportunistic smash and grab, which would result in Kudelski haveing to pay around $150 million at the new price, but then it could raid the $110 million in cash that sits on OpenTV’s books. Effectively it would buy 68% of a company which is profitable and doing around $110 million of revenue a year, for just $40 million. A fact made worse given that the last quarterly revenues are an improvement on when Kudelski bid last time, and show $27.6 million around 3% up on this time last year.
The tender offer will expire at 5:00 pm New York City time on Friday, November 6, and will be financed through a credit facility, plus cash held by Kudelski. The offer does not require the approval or recommendation of the OpenTV board.
When Kudelski bought OpenTV in 2006 it said that it would take it into new markets, including mobile TV, terrestrial TV and internet video, from the cable and satellite markets, where it already held sway.
In the last bidding round, existing shareholder Discovery Group, with an 11.3% holding in OpenTV, said that if that was all the value it placed on Open TV then it was happy to buy back all the shares that Kudelski held. It will be interesting, in these hard time to see if that is the same reaction this time. It is possible that this new price is one agreed between the two sides and perhaps it will now run smoothly.
OpenTV is known for its interactive applications, mostly delivered to
non-US cable companies and claims to have a dominant market share in set top software offering DVR, VOD and other on-demand services, Electronic Program Guides, on-demand content syndication, interactive applications, and more recently interactive advertising applications and had a history of working alongside the Kudelski Group even before the takeover. But equally it works with rivals of the Kudelski conditional access subsidiary Nagravision, such as Irdeto.