OpenTV, which makes software for digital interactive television, said on Sunday it will buy Spyglass in a $2.5 billion stock deal that will expand its access over the Internet and into wireless products.
Under the terms of the tax-free deal, Spyglass stockholders will receive 0.7236 OpenTV Series A ordinary shares in exchange for each Spyglass common share, OpenTV said in a statement.
Based on OpenTV`s closing stock price on March 24, the transaction values Naperville, Ill-based Spyglass at $122.28 per share, an about 75% premium to Spyglass` closing price of 69 7/8 on Friday.
OpenTV said the transaction will expand its digital interactive services -- or two-way TV -- to allow customers to browse the web and chat. It will also enable OpenTV to evolve into wireless cell phones and mobile devices through Spyglass` Prism product, which reorganises and reformats standard Web content to display on set-top boxes, mobile phones and other non-personal computer devices.
"In our view there are a very limited number of companies that have all this technology and this deal will clearly enhance value for our shareholders," OpenTV chief financial officer Randy Livingston told Reuters.
Livingston said the deal should be accretive to OpenTV over the next two years on a revenue per share basis and neutral on an EBITDA (earnings before interest, taxes, depreciation, and amortisation) per share basis this year and slightly accretive next year.
"The whole interactive TV market is exploding, particularly in Australia, Europe and Asia and we think it will begin to take off in the United States in the next two to three years," Livingston said.
In the US market alone, $18 billion a year from TV-based commerce and interactive advertising is expected to be generated by 2004, Livingston projected.
The enormous potential of two-way TV and its recent emergence has driven several industry consolidations, including TV Guide`s $9.2 billion proposed merger with Gemstar International Group announced in December.
The purchase by OpenTV, whose competitors include Microsoft and Wink Communications, will double the company`s revenues. OpenTV and Spyglass each had revenues of $26 million and $29.6 million, respectively last year, said Livingston.
According to terms of the deal, Spyglass stockholders and option holders will receive about 15 million OpenTV shares and own about 18% of the combined company`s stock on a fully diluted basis.
OpenTV`s Chief Executive Jan Steenkamp will remain CEO and while Spyglass chairman and CEO, Doug Colbeth, will become executive vice president, corporate development of a newly-formed wireless communications unit, OpenTV said.
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