Sonic Solutions has agreed to pay $323 million in cash and stock to buy DivX to help accelerate its rollout of over-the-top video services. The move will give Sonic access to a wider range of consumer electronic devices that can play back DivX-formatted video files, while also enhancing its digital rights management protection.
DivX technology is said to be embedded in more than 300 million devices shipped from consumer electronics manufacturers, including 8,500 different models of TVs, DVD and Blu-ray disc players, and more than 80 different mobile handsets. So Sonic will be able to leverage DivX to help advance its own RoxioNow over-the-top video service, which it’s trying to get embedded on a number of CE devices.
The firms have to date worked closely together on delivering video to connected devices and mobile phones. In December, they inked a strategic partnership for downloadable media in the DivX format, and in February extended terms of the deal to include mobile devices. In addition to running its own online video service, Sonic provides a white-labeled back-end as well as studio rights deals for digital storefronts operated by Blockbuster and Best Buy.
Sonic will acquire all outstanding shares of DivX in exchange for $3.75 in cash and 0.514 shares of Sonic common stock, or $9.83 a share, for a total value of $323 million. The deal remains subject to regulatory and shareholder approvals, but is expected to close in September. Sonic expects it will as much as double its fiscal 2012 per-share earnings on a non-GAAP basis.
The current Sonic management team will remain in place to lead the combined company, with some key executives such as CEO Kevin Hell, CFO Dan Halvorson and the company’s EVP of business & legal affairs and general counsel, David Richter staying on during a transition period. Once the deal is closed, Sonic will add two members of the DivX board to its own.
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