Analyst Alan Gould of Natixix Bleichroeder says the sale price of 2.8 billion bucks for Gemstar-TV Guide was disappointing. But he also doesn’t see it likely that anyone else besides Macrovision will make a bid for the company.
“We were too optimistic on the asset value and recognize that management has probably been more focused on getting a deal done than running the company,” Gould wrote in a note to clients. But while he thought the company ought to be worth more, he assumes that the logical strategic buyers, including Google, Microsoft, Comcast and others, all looked at the deal and took a pass. “We surmise that 41% shareholder, News Corporation, agreed to vote in favor of the deal because it was the best/only deal offered and Mr. Murdoch decided it was time to put the Gemstar chapter behind him,” Gould said. He had originally estimated that a private equity buyer would pay a minimum six bucks per share and a strategic buyer at least 7.50, so 6.35 was at the low end of his expectations.
Wall Street clearly didn’t like the deal. Gemstar-TV Guide shares dropped 99 cents – and more than that in trading – after the deal was announced to close Friday at 4.99. Gould notes that is a 17% arbitrage opportunity if the deal goes though, and he assumes it will since News Corporation is committed to voting its 41% stake in favor of the deal, which puts it well on the way for the necessary two-thirds shareholder approval.