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October 4, 1999

Gemstar and TV Guide to Merge in $9.2bn Deal

By CBR Staff Writer

Gemstar International Group Ltd, the electronic program guide and consumer electronic application developer, has agreed to merge with TV Guide Inc, in a transaction valued at $9.2bn based on Gemstar’s stock price at close of market on October 1, including assumed debt of around $600m. The combined company will have revenue of over $1.5bn. The move represents a major consolidation in the electronic program guide industry, just as growth in broadband communications and e-commerce makes the technology of central importance.

The combination will be renamed TV Guide International Inc once the transaction is closed, and TV Guide shareholders will receive 0.6573 shares of Gemstar common stock for each share of TV Guide. Henry Yuen, currently CEO of Gemstar, becomes chairman and CEO of the combined company, and Gemstar’s chief financial officer, Elsie Leung, continues in the same role. TV Guide’s Joachim Kiener and Peter Boylan become co-presidents, and take on the role of chief operating officers for different parts of the business. The transaction isn’t expected to close until the second half of next year.

Gemstar’s VCR+ tool for programming video cassette recorders, has its numbers published in over 1,800 newspapers and program guides worldwide. TV Guide produces the eponymous weekly magazine with a print run in the US of 34 million, and runs the TV Guide cable TV channel, reaching 50 million US households. The two are already involved in a joint venture, Interactive Prevue Guide, set up in January 1998 as part of a settlement to end litigation caused by Gemstar’s acquisition of StarSight Telecast Inc, which UVSG claimed had infringed its patents. Prevue signed a ten-year agreement with Telecommunications Inc – now part of AT&T Corp – to deploy interactive program guides to TCI cable customers.

But Gemstar exerted considerable effort later in 1998 extracting itself from a $2.8bn hostile bid from UVSG. It even enlisted Microsoft Corp to help defend itself, through an agreement to jointly develop and co-market EPG products. (Microsoft also has its own guides, found in WebTV Plus and Windows). Meanwhile TV Guide and UVSG agreed to merge under a complex arrangement, and UVSG finally changed its name to TV Guide Inc in March this year. Cable company Liberty Media Inc and Rupert Murdoch’s News Corp Ltd each own a 44% share of the company.

Yuen said the strengths of Gemstar and TV Guide were complementary and highly synergistic. TV Guide’s relationships with publications, cable operating companies, programmers and content providers are perfect complements to Gemstar’s association with broadcasters and consumer-electronics manufacturers. He said that TV Guide’s experience and relationship with program-related advertiser customers will boost the establishment of an advertising and transaction business based on electronic program guides. á

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