Kudelski’s Premium Tender Offer at US$ 1.55 per Share Superior to OpenTV’s Standalone Prospects with Near Terms Revenues ...
09 Novembro 2009 - 2:30PM
Business Wire
The Kudelski Group (SIX: KUD.VX) today commented on its tender
offer commenced on October 5, 2009 to acquire all outstanding Class
A shares of OpenTV Corp. (NASDAQ: OPTV) not already owned by
Kudelski or its subsidiaries for US$1.55 per share in cash,
implying a total equity value of at least US$215 million1.
The Kudelski Group is committed to supporting OpenTV’s customer
franchise, management, employees and other stakeholders and has a
clear plan requiring significant investments to ensure the mid- and
long-term sustainability of OpenTV. Kudelski is determined to
execute the plan, and, as a respectful controlling shareholder,
will not compromise OpenTV’s sustainability for purely short-term
profit. Therefore, Kudelski would like to make sure that
shareholders currently holding OpenTV shares understand the
potential implications and risks for those who choose not to tender
their shares.
The fairness and the merit of the transaction have been
recognized by key customers and many shareholders. Here are some
additional key facts supporting that the premium all cash offer
provides higher value for all OpenTV shareholders relative to the
current standalone strategy:
SEVERE CHALLENGES AHEAD FOR OPENTV
OpenTV’s top 20 current customer business is declining, and a
transformation is required. Below are several facts that support
this assessment:
1. In its October 26, 2009 press release titled “BSkyB and
OpenTV Extend Partnership” OpenTV said, “Sky has licensed OpenTV’s
patents and other intellectual property rights to support ongoing
development of the company’s digital television platform.” While
Kudelski highly values OpenTV’s excellent relationship with BSkyB
and sees it as a cornerstone of OpenTV’s business, it is evident
that the current relationship is changing. The new agreement will
move OpenTV’s relationship with BSkyB from a de-facto sole
middleware provider to a licensor of intellectual property enabling
the use of set-top boxes without OpenTV middleware. The license
agreement allows BSkyB to build its own solutions, whereas
previously the license was always included in OpenTV’s products and
solutions. While Kudelski fully supports OpenTV’s efforts to remain
the leading middleware supplier to BSkyB and other News Corp.
accounts, this recently announced agreement will materially reduce
OpenTV’s revenues and profitability. BSkyB has repeatedly led the
way for other News Corp. operators, so there is a risk that the
BSkyB transition expands to other parts of News Corp. According to
the latest OpenTV 10-K, revenues received from News Corp. entities
represented 29% of the company’s total revenues in 2008.
2. OpenTV and Kudelski Group entities such as Nagravision share
multiple joint accounts. While OpenTV is the preferred partner in
such accounts, Nagravision is not in a position to recommend OpenTV
solutions when the OpenTV solution does not address market needs.
Kudelski sees that most of its future business will be generated by
new solutions not currently addressed by OpenTV middleware. In
order for the Kudelski Group to continue to bring new customer
prospects to OpenTV, OpenTV’s product roadmap should be drastically
accelerated and completed, as advocated by Kudelski. In 2008,
around 30% of OpenTV’s revenues were with joint Kudelski accounts,
and US$8.6 MM came directly through the Kudelski resale
agreement.
3. As disclosed in OpenTV’s 2008 10-K, annual revenues from
EchoStar, once a top OpenTV customer, have declined nearly 60%
(from US$13.2 MM to US$5.8 MM) since 2006, when EchoStar’s revenue
contribution was 13% of OpenTV’s total revenues. This trend is
likely to continue.
4. OpenTV’s past and current R&D efforts account for an
important percentage of its revenues, but are not sufficient to
service all forecasted customer accounts nor to compensate for
revenue erosion from OpenTV’s current top 20 accounts.
In total, the above revenue sources represented approximately
60% of OpenTV’s 2008 revenues. A significant amount of that revenue
is at risk. As detailed in its presentation filed with the SEC on
October 26, 2009, Kudelski’s projections for OpenTV’s 2011 revenues
assumed 15% middleware billings adjustments. Recent developments
confirm this downward trend, and Kudelski believes OpenTV’s
revenues generated with current top 20 customers are likely to
further decline. Alternative approaches to valuing OpenTV did not
take these important factors into account. In its 12 years of
existence, OpenTV has been profitable in only one year; the loss of
a single major account would have a significant bottom-line
negative impact.
Kudelski would like to correct some inaccurate statements and
arguments that have been made about the transaction:
- In such a fast evolving and
highly volatile technological environment, using historical
valuation metrics and inappropriate comparables as a basis for
measuring the fair value of OpenTV is misleading. The problem is
magnified when the comparison ignores the business fundamentals and
investment environment facing OpenTV today. Kudelski does not
believe that comparing OpenTV’s subscale operations with an
optimally sized organization with a different scope of activities
is appropriate, especially in an industry where size does
matter.
- Discovery Group was until
recently OpenTV’s second largest investor and previously made
public statements suggesting that Kudelski’s $1.55 per share offer
price was materially too low. In recent weeks Discovery Group sold
more than seven million shares, representing the majority of
its OpenTV shareholdings, for an average sale price below US$1.55 per share. We believe this
is a significant development and indicates that Discovery Group has
revised its assessment of OpenTV’s value and recognizes the
superior value of our offer.
SHAREHOLDERS SHOULD DECIDE BEFORE EXPIRATION ON NOV.
12
As a reminder, the tender offer and withdrawal rights are
scheduled to expire at 11:00 pm New York City time on Thursday,
November 12, 2009, unless extended. To learn more about the tender
offer, please visit www.opentvvalue.com where you will find the
latest information, frequently asked questions and relevant SEC
filings containing further details on the tender offer. If you have
any questions, please call MacKenzie Partners, Inc., the
Information Agent for the offer, at (800) 322-2885 (toll-free).
About the Kudelski Group
The Kudelski Group (SIX: KUD.VX) is a world leader in digital
security and convergent media solutions for the delivery of digital
and interactive content. Its technologies are used in a wide range
of services and applications requiring access control and rights
management to secure the revenue of content owners and service
providers for digital television and interactive applications
across broadcast, broadband and mobile delivery networks. The
Kudelski Group is also a world technology leader in the area of
access control and management of people or vehicles to sites and
events. It additionally offers professional recorders and high-end
Hi-Fi products. The Kudelski Group is headquartered in
Cheseaux-sur-Lausanne, Switzerland. Please visit www.nagra.com for
more information.
IMPORTANT INFORMATION
This communication does not constitute an offer to buy or a
solicitation of an offer to sell any securities. Kudelski SA and
Kudelski Interactive Cayman, Ltd., a subsidiary of Kudelski SA,
have filed a Tender Offer Statement and Rule 13e-3 Transaction
Statement on Schedule TO with the SEC containing an offer by
Kudelski Interactive Cayman, Ltd. to purchase all of the
outstanding Class A shares of OpenTV not owned by Kudelski SA or
its subsidiaries for US$1.55 per share. The tender offer and
withdrawal rights are scheduled to expire at 11:00 pm New York City
time on Thursday, November 12, 2009, unless extended as described
in the offer to purchase filed with the SEC. The tender offer is
being made solely by means of the offer to purchase, and the
exhibits filed with respect thereto (including the letter of
transmittal), which contain the full terms and conditions of the
tender offer. OpenTV shareholders are urged to read carefully in
their entirety those and other documents filed with the SEC, as
they may be amended, because they contain important information
about the tender offer. OpenTV shareholders can obtain copies of
all materials filed by Kudelski SA with the SEC free of charge at
the SEC’s website, www.sec.gov, or by calling MacKenzie Partners,
Inc., the Information Agent for the tender offer, toll-free at
800-322-2885. Shareholders can also access these and other
materials related to the tender offer at www.opentvvalue.com.
This communication contains forward-looking statements that
involve certain risks and uncertainties that are difficult to
predict. These statements are based on current expectations of
Kudelski and its affiliates and currently available information.
They are not guarantees of future performance and are based upon
assumptions as to future events that may not prove to be
accurate.
1 Based upon valuing the aggregate Class A and Class B shares at
the US$1.55 per share offer price. Does not reflect any premium
that would be associated with the higher voting Class B shares.
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