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Sonic Solutions to Acquire DivX

2 Jun, 2010 By: Erik Gruenwedel

Sonic Solutions June 2 said it will acquire digital media company DivX in a cash and stock transaction worth $323 million, or 41% above DivX’s June 1 closing stock value.

Under terms of the agreement, stakeholders of San Diego-based DivX will receive $3.75 cash and 0.514 shares of Novato, Calif.-based Sonic common stock for each share of DivX they own. The merger, which has the approval of both companies’ boards, is expected to close by September pending shareholder and regulatory approvals.

Following completion of the merger, DivX stockholders will own about 35% of the combined company's capital stock. Sonic expects to add two members of the DivX board of directors, to be named later, to its board at the closing of the transaction. DivX CEO Kevin Hell, CFO Dan Halvorson and David Richter, EVP of business & legal affairs and general counsel, will not continue with the combined companies in their current positions.

Sonic said it intends to incorporate DivX’s video playback technology to broaden its own Internet-based movie delivery software and expand relationships with retailers and consumer electronics manufacturers. DivX last month announced its technology had been installed in more than 300 million consumer electronics shipped worldwide, including Blu-ray/DVD players, digital televisions and portable media devices.

Specifically, Sonic believes the acquisition will be accretive to its shareholders, including possibly doubling fiscal year 2012 share earnings. The DivX technologies are expected to give Sonic added leverage for Internet-video delivery, including the dominant tools for content preparation in “the cloud,” video playback, and Hollywood-approved digital rights management (DRM).

“The combination of Sonic and DivX promises to be the foremost provider of platforms, tools, and technologies for the efficient delivery of premium video entertainment to virtually any type of consumer electronics device,” said Dave Habiger, president and CEO of Sonic. “We expect DivX's technology and broad deployment in the CE and mobile areas to give us significant leverage as we expand and enhance our RoxioNow premium entertainment platform.”

Sonic reports fourth quarter (ended March 31) results June 3.

DivX shares were up 23% to $8.56 per share in mid-morning trading. 

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