The word has been out since July that Gemstar-TVGuide (GMST) is “in play”, meaning that management has gotten the green light to sell the company. Since then the price of the stock has moved up from the high $4 per share range to the high $6 per share range. One thing that is of particular interest with this company is that just one entity affiliated with News Corp. holds over 40% of the company’s outstanding stock, meaning that a potential buyer could in one stroke acquire a 40% plus stake in the company through private negotiations with just News Corp. Other large stakes that could be privately negotiated seem to also be held by a few players, suggesting that cobbling together one or two more private deals might give a potential buyer a majority voting or “control” stake of over 50% in the company. Who might those potential buyer be, and what might they do upon purchasing the company? I suspect with the renewed run-up in the value of the internet stocks (and especially Murdoch’s desire to have more real estate in the “internet” space) the most likely buyer will be an internet company, and the purchase will most likely be an all stock acquisition. In fact, I only see this kind of buyer and this kind of deal structure offering a premium price of maybe as high as $13 per share for the shares of GMST (deconstructed as: $2 per share for the print guide, $3 per share for the TVG Network, $8 per share for the patent portfolio and TV and internet space guides.) What would a potential buyer do once it acquires this property? Well it depends on the buyer. One set of buyers would probably monetize a portion of the the acquistion by looking to spin-off and sell the “paper guide” assets of the company to a traditional paper magazine company, and spin and sell-off the TVG horse racing/betting assets to a sports franchise operator, while retaining and trying to build on the electronic guide and search assets of the portfolio in order to leverage their search and advertizing reach in TV space. Another set of buyers might look at retaining the entire portfolio as an avenue, not just to leverage their reach into TV space, but to also segway themselves into print advertizing through the company’s print guides, and sports advertizing through the TVG network. What currently surprises me is that this unique company has not been snapped up yet, or that a bidding war has not broken out over it by any number of interested companies. My personal impression is that Google will buy the enterprise and keep it whole.
Note of interest: As a matter of interest to readers of this blog, I was an early investor in a pioneering internet guide startup named Yack.com. Due to egregious behavior on the part of certain parties involved, I had to file a lawsuit against that company. A settlement was reached which extended me certain rights if the company (its applications) were transferred elsewhere. I suspect (but cannot prove) that a number of well-known internet companies are in possession of these applications, for which I have not been compensated (more likely than not because the recipient companies involved were never made aware of the existence of the settlement.) The companies I suspect are in possession of such applications include: eBay (through it purchase of StubHub), Google, and -yes- Gemstar-TV Guide.