Macrovision buys Gemstar-TV Guide; Countrywide, NovaStar, Luminent give back gains; Thornburg continues rise

By Evan Weinberger

New York, Dec. 7 - Macrovision Corp.'s deal to purchase Gemstar-TV Guide International Inc. was the highlight Friday in the world of mergers and acquisitions.

The deal is valued at a total $2.8 billion and will be completed in cash and stock.

In return for their shares, Gemstar stockholders will receive $6.35 or 0.2548 shares in a new holding company that will be established and own both firms from Macrovision. That represents a 6% premium on the cash side of the deal, or an 11% premium on the stock side.

Santa Clara, Calif.-based Macrovision provides a platform for the distribution, security and enhancement of digital transmissions. Los Angeles-based Gemstar produces, among other things, TV Guide. The two companies said their merger would allow them to provide programming schedules and information through cable decoder boxes, computers and mobile phones.

"Users today are demanding an open, easy to use and integrated set of capabilities that deliver on the promise of the digital home. This presents challenges to the content providers, distribution channels and device manufacturers as they struggle to quickly bring such offerings to market while preserving their unique value propositions," Macrovision president and chief executive officer Fred Amoroso said in a statement.

"We are now in a position to accelerate our vision by providing an enhanced combination of capabilities in support of the entire value chain, which is designed to deliver a differentiated solution for consumers."

The deal has proven to be a head scratcher to investors.

Macrovision is buying the larger company, and taking on a large amount of debt to do so. The company announced plans for a $650 million term loan B and a contingent $150 million bridge loan from JPMorgan and Merrill Lynch. Macrovision will take on the bridge loan if it can't secure the $150 million through other debt instruments, including senior unsecured notes and convertibles.

Also, there were no plans mentioned for the print edition of TV Guide.

Still, Gemstar CEO Rich Battista sounded an upbeat tone announcing the deal.

"This is a terrific transaction for our stockholders, giving them compelling value and a chance to participate in the opportunity to join forces with Macrovision to maximize value for all of our constituencies," he said.

The stockholders of both companies apparently disagreed.

Macrovision stock (Nasdaq: MVSN) plunged $5.55, or 21.35%, to close at $20.44.

Macrovision's existing 2.625% convertible senior notes due Aug. 15, 2011 closed at 97.768 versus a stock price of $20.44. It had been at 115.687 versus a stock price of $25.99 Thursday.

Gemstar stock (Nasdaq: GMST) didn't do much better. The stock dove 99 cents, or 16.56%, to $4.99 Friday.

Macrovision's acquisition of Gemstar is expected to close in the second quarter of 2008.

The sale process started in June when News Corp., which owns 41% of Gemstar, pushed Gemstar to look for a buyer.

Macrovision was an unexpected winner of the company, as other, larger firms like Microsoft Inc. were linked to Gemstar.

But Macrovision is no stranger to aggressive acquisitions. It bought Mediabolic for $43 million in January.

Countrywide, NovaStar give back gains

Following a surge the past few days on the subprime mortgage rate freeze deal that was announced Thursday, Countrywide Financial Corp. and NovaStar Financial Inc. gave back some of their gains as people had a chance to analyze the plan.

One worry that has cropped up is the danger that investor groups may sue mortgage lenders who choose to opt into the plan, which is voluntary.

With that hanging overhead, and with investors looking to take a profit heading into the weekend, several mortgage lenders that had been up closed Friday down.

Calabasas, Calif.-based Countrywide (NYSE: CFC) lost 56 cents, or 4.63%, to close at $11.54.

Kansas City, Mo.-based subprime lender NovaStar (NYSE: NFI) lost 27 cents, or 8.77%, to close at $2.81.

San Francisco-based Luminent Mortgage Capital Inc. (NYSE: LUM) fell 4 cents, or 3.48%, to $1.11.

One exception was Santa Fe, N.M.-based Thornburg Mortgage Inc. (NYSE: TMA), which picked up 83 cents, or 7.61%, to close at $11.74, on Friday.

Overall equity markets ended the day mixed following a middling job creation report and concerns about the Federal Reserve's stance on a rate cut when it meets Tuesday.

The Dow Jones Industrial Average picked up 5.69 points, or 0.04%, to close at 13,625.58.

The Nasdaq slipped 2.87 points, or 0.11%, to close at 2,706.16.

The Standard & Poor's 500 closed at 1,504.66, a slide of 2.68 points, or 0.18%.

Delta Financial rebounds

Woodbury, N.Y.-based subprime lender Delta Financial Corp. announced Thursday that it planned to file for bankruptcy protection.

Its stock was slaughtered Thursday.

But it hasn't been delisted and still trades and even had a relative rebound Friday.

Delta Financial (NYSE: DFC) picked up a penny, or 5.29%, to close at around 20 cents Friday.

IndyMac gains ground

Pasadena, Calif.-based mortgage lender and thrift bank IndyMac Bancorp. Inc. regained lost ground Friday after getting slashed Thursday.

Late Wednesday, IndyMac announced that it was searching for ways to raise capital.

IndyMac stock (NYSE: IMB) added 35 cents, or 4.35%, to close at $8.40 on Friday.

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