One of our favorite rumors rides again, but this time it's Dish that might be interested in buying TiVo. The new twist this time though is the motivation, and we can totally see how Dish would love to make this happen. The problem of course is that TiVo isn't interested in any such shenanigans and has gone as far as to write a poison pill into its bylaws. Our friend Davis Freeberg has been writing about TiVo's poison pill for years and more recently, at about the same time as
the latest court decision came down against Dish, he saw some interesting traffic in his web server logs from none other than a Dish Network IP. No clue who the user was, but they spent some time reading up on TiVo's poison pill. Davis is no lawyer, but it is his understanding that if Dish attempted to take over TiVo, it'd cost them about $71 per share -- which comes to about $7.5 Billion. This is about seven times what the stock is actually worth and although we'd be shocked if this happened, we have to admit that crazier things have.
Reader Comments (Page 1 of 1)
Stan @ Jun 10th 2009 7:04PM
in this economy? good way to go bankrupt...but then they could always get a bailout!.."L"
nick @ Jun 10th 2009 7:26PM
How about a collaboration? Why can't Dish just enter into an agreement to use TIVO?
squiggleslash @ Jun 10th 2009 7:37PM
Because TiVo isn't interested, and Echostar is probably somewhat pissed about it anyway.
TiVo sees itself as the winner of a fight and as a company owed a huge payoff by Echostar who they see as dragging out a court case they feel they were in the right over.
Dish sees TiVo as a holder of trivial patents that make it impossible to implement something without TiVo's consent.
Neither side are going to want to collaborate on anything.
There's a few ways around the poison pill BTW. One is for Echostar to work with other interested parties so 51% of the shares are owned by companies who want TiVo closed down, but of which none own more than 14% of the company. That's a stretch.
Another is to challenge the poison pill in court, as they're not generally seen as 100% kosher.
And finally, they can call TiVo's bluff, buy 15% of TiVo, let it go bankrupt, and bid for the assets, which should be considerably less than $7.5B. The assumption TiVo and the author makes is that any hostile takeover would be by a company that wants TiVo in some viable state. If all you're trying to do is destroy the company, a poison pill actually works to your advantage.
Jose Alvear @ Jun 10th 2009 8:28PM
Don't forget to add the link to Davis Freeberg's web site and story. I mean, you guys mentioned Dish going to his website for research and then you don't mention it?
Davis Freeberg @ Jun 10th 2009 7:53PM
Squiggles, you should go back and read the poison pill. If Dish tries to "shut TiVo down" by acquiring more than 15%, TiVo shareholders would have the right to assume 65% control over EchoStar based on their current market cap. In other words, triggering the pill would get Dish management fired not TiVo.
You are right about finding five other parties who are willing sellers though which is why I mention the possibility of killing the pill in the post. The problem with this is though, that you have to have been a shareholder prior to the judgement in order to vote. While there were a lot of people who sold their shares post judgement, anyone who held prior to judgement is likely a long time TiVo owner and one that probably isn't so fond of Dish. If you didn't like Dish and had already sold your shares would you vote to make it easier for them to strip out the poison pill? I doubt it. Dish could try again in a year or wait 2 years for it to expire, but that's assuming that they can litigate that long.
squiggleslash @ Jun 10th 2009 8:02PM
Davis - where are you reading that? All I've read is that buying 15% of TiVo would immediately result in TiVo issuing a $60 per share dividend to all of their shareholders. What you're proposing isn't in anything I'm reading, and frankly, I don't see how an arrangement could be legally binding on anyone.
Issuing a $60 a share dividend forces up the share price and leaves TiVo oweing $7.5B to its shareholders, making a takeover phenomenally expensive. That's what makes it a poison pill.
chumley @ Jun 10th 2009 8:01PM
This is unfounded speculation. One unknown user visiting a blog for 25 mins is not credible evidence of anything.
TJ @ Jun 11th 2009 4:43PM
Exactly. In fact, I happen to be at an Echostar/Dish IP address right now.
Wait....did me slacking off at work cause all of this speculation?
Davis Freeberg @ Jun 10th 2009 8:13PM
Check out the press release that summarizes the pill at the very bottom of the document.
"If a person becomes an Acquiring Person, each Right will entitle its holder to purchase, at the Right's then-current exercise price, a number of common shares of TiVo having a market value at that time of twice the Right's exercise price. Rights held by the Acquiring Person will become void and will not be exercisable to purchase shares at the bargain purchase price. With limited exceptions, an Acquiring Person is defined as a person who acquires 15% or more of the outstanding common stock of TiVo. If TiVo is acquired in a merger or other business combination transaction which has not been approved by the Board of Directors, each Right will entitle its holder to purchase, at the Right's then- current exercise price, a number of the acquiring company's common shares having a market value at that time of twice the Right's exercise price."
rogers @ Jun 10th 2009 8:53PM
"If a person becomes an Acquiring Person, each Right will entitle its holder to purchase, at the Right's then-current exercise price, a number of common shares of TiVo having a market value at that time of twice the Right's exercise price. Rights held by the Acquiring Person will become void and will not be exercisable to purchase shares at the bargain purchase price. With limited exceptions, an Acquiring Person is defined as a person who acquires 15% or more of the outstanding common stock of TiVo. If TiVo is acquired in a merger or other business combination transaction which has not been approved by the Board of Directors, each Right will entitle its holder to purchase, at the Right's then- current exercise price, a number of the acquiring company's common shares having a market value at that time of twice the Right's exercise price."
That is the classic formulation of a pill - contains both flip-in and flip-over features. Delaware courts will usually uphold the adoption of a poison pill under the business judgment rule.
AztecPilot @ Jun 11th 2009 10:04AM
The comments here lean to the the idea that DISH is taking a retaliatory stance. I think the opposite is true. Dish could acquire TIVO and stop the bickering and patent issues. They would have the best DVR in the biz. They could stop the DirecTivo project, or charge a huge premium for it. It would give DISH a huge Tech advantage with TIVO/Sling in there DVR's.
Heavytoka @ Jun 11th 2009 11:25AM
I totally agree with you
Zingerhill @ Jun 11th 2009 11:16AM
Folks are reading two much into the poison pill. As a practical matter it is very difficult to invoke a poison pill. There have been very few cases of a poison pill actually being used. It is really designed to bring the hostile party to the table. If Dish were to offer a 50 - 100% premium to the current share price it would be very difficult for Tivo to not accept the offer.